Nationwide Mortgage Licensing System (NMLS) Practice Exam

For how many days are credit reports on new construction considered valid?

1. 90 days

2. 120 days

3. 180 days

4. 225 days

The correct answer is: 120 days

Credit reports for new construction are considered valid for 120 days. This timeframe is established to ensure that the financial information used to evaluate the borrower's creditworthiness is current and reflective of their financial status during the application process. In the context of new construction, having a shorter validity period for credit reports is important because it allows lenders to assess the borrower's ability to repay the mortgage based on the most up-to-date financial information. As construction projects can extend over several months, a 120-day window helps to mitigate risks for lenders by requiring updated reports that reflect any changes in the borrower's financial situation that could occur during the construction phase. While some options reflect longer durations, the 120-day period strikes a balance between ensuring that credit information is fresh while also accommodating the time typically required for new construction projects to move forward. This practice also aligns with the guidelines set forth by regulatory bodies, which aim to protect both lenders and borrowers in the mortgage process.