Challenging Practice Test Questions

NMLS Practice Test Hard Questions A discount point is BEST described as a charge the borrower pays to: A.) A lender to decrease the interest rate on the mortgage loan B.) A mortgage broker at the time of application to obtain a favorable rate C.) The seller as part of the closing costs of a loan D.) A lender to ensure against foreclosure A.) A lender to decrease the interest rate on the mortgage loan A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000 in option money to be credited at closing on property with sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the down payment at closing? D.) $25,000 A.) $32,000 B.) $27,000 C.) $30,000 D.) $25,000 $160,000 x .20 (20%) = 32000 - $7,000 = $25,000 If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant's monthly income? A.) $2,163.20 B.) $2,343.47 C.) $2,379.52 D.) $2,487.68 B.) $2,343.47 $13.52x 40 hours = $540.8 x 52 weeks = $28,121.6 annually /12month = $2,343.47 Monthly income The requirement for private mortgage insurance is generally is continued when the loan-to-value ratio falls below: A.) 20% B.) 50% C.) 80% D.) 90% C.) 80% Which of the following documents itemizes all settlement costs including lender charges? A.) Agreement of sale B.) HUD-1/closing Disclosure C.) Form 1003 D.) Forbearance agreement B.) HUD-1/closing Disclosure According to the Truth-in-Lending Act (TILA), the term "refinance" applies to A.) A change in a payment schedule D.) The satisfaction of an existing obligation and its replacement B.) A reduction in annual percentage rate by a new obligation C.) The renewal of a single payment obligation with no change in the original terms D.) The satisfaction of an existing obligation and its replacement by a new obligation What does a loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales? A.) An appraisal A.) An appraisal B.) A market survey C.) An area survey D.) A Cost-benefit analysis Which of the following methods of disclosure does NOT meet the requirements of Equal Credit Opportunity Act (ECOA)? A.) E-mail 1 / 12 C.) Telephone B.) Mailed letter C.) Telephone D.) Faxed letter Term "20 basis points" expressed as a percentage is: B.) 0.20% A.) 0.2% B.) 0.20% C.) 2.00% D.) 20.00% one hundredth of one percent, used chiefly in expressing differences of interest rates. 0.01 so 0.01 x20 = 0.2 According to the Truth-in-Lending Act (TILA), which if the following fees is EXCLUDED from the calculation of the annual percentage rate? A.) Hazard insurance A.) Hazard insurance B.) Wire transfer C.) Prepaid interest D.) Mortgage insurance premiums FHA loans are: A.) Partially guaranteed B.) 100% insured C.) Exempt D.) Entitled A.) Partially guaranteed The late fee for a conventional loan is: A.) 3% of principle and interest B.) 4% of principle and interest C.) 5% of principle and interest D.) 10% of principle and interest C.) 5% of principle and interest A funding fee if required for a: A.) FHA loan B.) VA loan C.) Jumbo loan D.) Conventional loan B.) VA loan A Mortgage Insurance Premium is required on: A.) FHA loan B.) VA loan C.) Jumbo loan D.) Conventional loan A.) FHA loan The mortgagee is the: A.) Borrower B.) Lender C.) Closing agent D.) Mortgage broker B.) Lender The borrower does NOT sign which document: A.) Deed B.) HUD-1/Loan Disclosure C.) Mortgage D.) Note A.) Deed Which documents is usually NOT recorded A.) Assignment of mortgage B.) Note C.) Deed D.) Mortgage B.) Note 2 / 12 A mortgage title insurance policy is NOT A.) Based on the loan amount B.) Transferable C.) Optional D.) Required by the lender C.) Optional Which parties sign the deed? A.) Grantor, grantee and two witnesses B.) Grantor and two witnesses C.) Grantee and two witnesses D.) Grantee only B.) Grantor and two witnesses When the mortgagor and the mortgagee title insurance policies are issued at the same time, this is known as: A.) Simultaneous issue B.) Concurrent issue C.) Subsequent issue D.) Dual issue A.) Simultaneous issue A shrubbery hedge is one example of an: A.) Encumbrance B.) Easement C.) Entitlement D.) Acceptable title impediment D.) Acceptable title impediment B.) Chattel mortgage A loan on personal property only known as: A.) Package mortgage B.) Chattel mortgage C.) Furnishing mortgage D.) Exotic mortgage Investopedia Chattel mortgage is a legal term used to describe a loan arrangement in which an item of movable personal property is used as security for the loan. The movable property, or chattel, guarantees the loan in this type of mortgage. This differs from a conventional mortgage in which the loan is secured by a lien on real property. Which of the following is NOT a characteristic of a Tenants in Common form of ownership: A.) Equal shares B.) Buy at different times C.) Right survivorship D.) Ability to will share C.) Right survivorship PITI payments do NOT include which of the following: A.) Principle B.) Funding Fee C.) Hazard Insurance D.) Interest B.) Funding Fee Who does Fannie Mae hold responsible for the quality of an appraisal? A.) Appraiser B.) Borrower C.) Mortgage broker D.) Lender D.) Lender Which law is known as Regulation B? A.) Truth-in-Lending B.) Real Estate Settlement Procedures Act C.) Equal Credit Opportunity Act D.) Patriot Act C.) Equal Credit Opportunity Act 3 / 12 Which law prohibits discrimination by lenders? A.) Truth-in-Lending B.) Real Estate Settlement Procedures Act C.) Equal Credit Opportunity Act D.) Patriot Act C.) Equal Credit Opportunity Act A property sold for $200,000 and was appraised at $180,000. The borrower received a loan for $150,000. What is the loan-to-value? A.) 75% B.) 83.3% C.) 90% D.) 92.4$ B.) 83.3% How many days does a lender have to send an adverse action notice? A.) 5 B.) 10 C.) 30 D.) 60 C.) 30 The GFE/Loan Estimate must be mailed or given to the borrower within how many days after rceiving the signed application? A.) 3 business days B.) 7 business days C.) 10 business days D.) 30 business days A.) 3 business days The enforcement of a lien is known as: A.) Closing B.) Foreclosure C.) Warranty inspection D.) Police Action B.) Foreclosure The minimum percentage of ownership in a related service required a conflict of interest disclosure? A.) 5% B.) 10% C.) 25% D.) 50% B.) 10% What minimum percentage o ownership qualifies an individual as self-employed? A.) 5% B.) 10% C.) 25% D.) 50% C.) 25% A salaried employee may have to produce which of the following documents to obtain a loan? A.) 90 day pay stubs B.) 2 years W2's C.) Profit and Loss statement D.) Balance sheet B.) 2 years W2's How may months must be left on an automobile lease to include it as a debt? D.) It is always included A.) 2 months B.) 5 months 4 / 12 C.) 10 months D.) It is always included A.) Truth-in-Lending Investopedia A right of rescission is a right under American federal law set forth by the Truth in Lending Act (TILA) that gives a borrower the right to cancel a home equity loan or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee within three days of closing. The right is provided on a no-questions-asked basis, and the lender must give up its claim to the property and refund all fees within 20 days of exercising of the right of rescission. Which law defines the right of rescission? A.) Truth-in-Lending B.) Real Estate Settlement Procedures Act C.) Equal Credit Opportunity Act D.) Patriot Act How long after the application date must social security payments continue to be received in order to count as income? A.) 3 months B.) 10 months C.) 2 years D.) 3 years D.) 3 years Credit reports on new construction are good for how many days? A.) 90 days B.) 120 days C.) 180 days D.) 225 days B.) 120 days Which clause in a mortgage allows a lender to increase the interest rate? A.) Defeasance B.) Escalation C.) Acceleration D.) Exculpatory B.) Escalation Which clause in a mortgage prevents the lender from foreclosing unless the borrower is in default? A.) Defeasance B.) Escalation C.) Acceleration D.) Exculpatory A.) Defeasance The lender has how many days to send the Satisfaction of Mortgage letter to the borrower once the loan balance is paid? A.) 30 days B.) 60 days C.) 90 days D.) 120 days B.) 60 days Which of the following increases cap rate? A.) Lower purchase price B.) Increase purchase price C.) Decrease cash flow D.) Increase interest rate B.) Increase purchase price Who should applicants contact if they have questions about their credit score or credit information? A.) Credit reporting agency A.) Credit reporting agency B.) Lender 5 / 12 C.) Mortgage broker D.) Attorney Who is responsible for maintaining the national flood maps? A.) HUD B.) FEMA C.) FHA D.) VA B.) FEMA A VA appraisal is known as a: A.) CRV B.) Veteran's appraisal report C.) Fannie Mae 1025 D.) AVA A.) CRV Fannie Mae's automated underwriting system is known as: A.) Fannie Mannie B.) Software Helper C.) Desktop Underwriter D.) Loan Prospector C.) Desktop Underwriter There are 10 days left in the month. The purchase price is $150,000, the loan amount is $100,000 and the interest rate is 6%. How much mortgage interest must the borrower pay at closing? A.) $164.38 A.) $164.38 B.) $250.00 C.) $440.20 D.) $2,739.73 100,000 x .06 (6%) = 6000 / 365 days = 16.438 x 10days = $164.38 Private Mortgages Insurance is automatically canceled when the loan-to-value reaches what level? A.) 55% B.) 70% C.) 78% D.) 80% C.) 78% Which types of loans are meant for rural areas? A.) VA B.) FHA C.) USDA D.) RAL C.) USDA The purchase price of a home is $200,000 and the loan amount is $180,000. The borrower pays 6% interest with 1 discount point C.) $3,600 and 1 origination point. What is the cost of the points? A.) $1,800 B.) $2,000 C.) $3,600 D.) $4,000 The key to this question is POINTS last time i accidentally added the 6% interest. There is 2 points so $180,000 x .02 = $3,600 If the Gross Rent Multiplier (GRM) decreases, the property value: A.) Increases B.) Decreases C.) Does not change D.) Can increase or decrease B.) Decreases What is the maximum allowable amount of VA seller concessions? C.) 4% A.) 2% B.) 3% 6 / 12 C.) 4% D.) 5% When a property increases in value for any reason this is known as: A.) Acceleration B.) Appreciation C.) Accumulation D.) Acclimation B.) Appreciation Which appraisal approach is most suitable for an office building? C.) Income capitalization approach Investopedia The income approach is a real estate appraisal method that allows investors to estimate the value of a property by taking the net operating income of the rent collected and dividing it by the capitalization rate. A.) Sales comparison approach B.) Cost approach C.) Income capitalization approach D.) Tenant collection approach Which of the following is incorrect regarding an adjustable-rate mortgage? A.) The index is fixed B.) The margin is fixed C.) There are rate caps on both the adjustment period and the life of the loan D.) LIBOR is a typical index used A.) The index is fixed Which of the following is NOT a fully amortized loan? A.) Term mortgage B.) Fixed-rate mortgage C.) Adjustable-rate mortgage D.) Bi-weekly mortgage A.) Term mortgage Which of the following is a negatively amortizing loan? A.) Reverse mortgage B.) Balloon mortgage C.) Term mortgage D.) Wrap mortgage A.) Reverse mortgage Fannie Mae does NOT require: A.) 6 months of bank statements B.) Verifiable funds C.) 2 years of addresses D.) Stable 2 year work history A.) 6 months of bank statements A note is: A.) The document that conveys title B.) The pledge of the property as collateral for the loan C.) The borrower's IOU D.) The document that transfers contractual rights to another investor C.) The borrower's IOU A mortgage is: A.) The document that conveys title B.) The pledge of the property as collateral for the loan C.) The borrower's IOU D.) The document that transfers contractual rights to another investor D.) The document that transfers contractual rights to another investor An adjustable-rate mortgage can adjust after 2 years with an adjustment cap of 3% per period and a lifetime cap of 7%. The staring interest rate is 4% What is the maximum interest that can 7 / 12 be charged at the time o the first adjustment? A.) 5% B.) 7% C.) 10% D.) 11% B.) 7% What is the FHA minimum down payment? A.) $0 B.) 3.5% C.) 5% D.) 10% B.) 3.5% Which law is known as Regulation C A.) Real Estate Settlement Procedures Act B.) Truth-in-Lending C.) Equal Credit Opportunity Act D.) Home Mortgage Disclosure Act D.) Home Mortgage Disclosure Act What is the minimum down payment for a USDA loan? A.) $0 B.) 3.5% C.) 5% D.) 10% A.) $0 How many hours of continuing education are minimally required? A.) 8 hours every year B.) 14 hours every year C.) 14 hours every 2 years D.) 20 hours every 2 years A.) 8 hours every year Who is responsible for completing the HUD-/Loan Disclosure? A.) The borrower B.) The closing agent C.) The loan originator D.) The grantor B.) The closing agent A mortgagor's title insurance policy is: A.) Transferable B.) Required C.) Based on purchase price D.) Never used C.) Based on purchase price The assignee of a mortgage and note is participating the in the: A.) Primary lending market B.) Capital market C.) Secondary mortgage market D.) Options market C.) Secondary mortgage market VA loans are: A.) Partially guaranteed B.) Insured C.) Exempt D.) Entitled A.) Partially guaranteed The late fee for a VA loan is: B.) 4% of principal and interest A.) 3% of principal and interest B.) 4% of principal and interest 8 / 12 C.) 5% of principal and interest D.) 10% of principal and interest The purchase price of a home is $325,000 and the appraisal price is $350,000. If the first mortgage is in the amount of $200,000 and the second mortgage is $60,000. What is the combined loan-to-value ratio? A.) 78.3% B.) 80.0% C.) 86.7% D.) 92.3% B.) 80.0% $200,000 + $60,000 = $260,000 / $325,000 = 80.0% The purchase price of a home is $375,000 and the buyer will assume a $175000 1st mortgage. The loan-to-value cannot exceed 85%. What is the maximum amount of the new 2nd mortgage. A.) $130,000 B.) $143,750 C.) $162,030 D.) $171,260 B.) $143,750 $375,000 x .85 (85%) = $318,750 - $175,000 = $143,750 What clause in a mortgage allows the lender to call the entire loan balance due? A.) Defeasance B.) Escalation C.) Acceleration D.) Exculpatory C.) Acceleration What clause in a mortgage prevents the lender from recovering additional assets from the mortgagor if there is a shortfall in the foreclosure proceeds D.) Exculpatory A.) Forbearance B.) Escalation C.) Acceleration D.) Exculpatory What term describes the intentional delay of action on the part of the lender upon a borrower's default? A.) Forbearance B.) Escalation C.) Acceleration D.) Exculpatory A.) Forbearance Which of the following does NOT appear in a lock-in agreement? A.) Expiration date B.) APR C.) Lock-in fee D.) Interest rate B.) APR Freddie Mac was originally known as: A.) Federal Home Loan Mortgage Corporation B.) Federal National Mortgage Association C.) Fair Discount Interest Rates D.) Free Certificate of Deposits A.) Federal Home Loan Mortgage Corporation Fannie Mae allows what amount of fees to be charged to a credit card? A.) 1 % of the loan amount plus $500 for the appraisal and credit A.) 1 % of the loan amount plus $500 for the appraisal and credit report report B.) 2 % of the loan amount plus $500 for the appraisal and credit 9 / 12 report C.) 3 % of the loan amount plus $500 for the appraisal and credit report D.) 4 % of the loan amount plus $500 for the appraisal and credit report Loan Prospector can NOT be used for which type of loans? A.) Conventional B.) VA C.) FHA D.) Commercial D.) Commercial A five bedroom, one bathroom house is an example of: A.) Appreciation B.) Functional Obsolescence C.) Economic Obsolescence D.) Residential Obsolescence B.) Functional Obsolescence Which of the following is NOT a benefit of an FHA loan? A.) Favorable interest rates B.) Low down payment C.) No monthly mortgage insurance D.) Assumable C.) No monthly mortgage insurance A loan closes on May 14. When is the first mortgage payment due? D.) July 1 A.) May 15 B.) June 1 C.) June 15 D.) July 1 45 days Alimony payments must continue to be received for how long after the application date if they are to be included as income? A.) 10 months B.) 2 years C.) 3 years D.) 4 years C.) 3 years Credit reports are good for how many days after they are pulled for qualifying purposes? A.) 60 B.) 90 C.) 120 D.) 180 C.) 120 When title is transferred and the buyer assumes no liability for the note, this type of transference is known as: A.) Free and clear B.) Subject to the mortgage C.) Assumption D.) Novation B.) Subject to the mortgage Which of the following is correct for an adjustable-rate mortgage A.) Index - margin = fully indexed rate B.) Margin - Index = fully indexed rate C.) Index + Margin = fully indexed rate D.) Index - Margin = fully indexed rate C.) Index + Margin = fully indexed rate The maximum term for a FHA loan is: A.) 15 years 10 / 12 B.) 30 years C.) 40 years D.) 50 years B.) 30 years Which of the following is NOT an involuntary lien A.) IRA lien B.) Judgment lien C.) Mortgage lien D.) Mechanic's lien C.) Mortgage lien The most comprehensive form of ownership is: A.) Real Estate Investment Trust B.) Fee simple absolute C.) Tenants in common D.) Joint tenancy B.) Fee simple absolute Which is NOT a component of a valid contract? A.) Agreement B.) Consideration C.) Two witnesses D.) Competent parties C.) Two witnesses Which type of co-ownership permits the property to pass an heir? A.) Collaboration B.) Tenants in common C.) Joint tenancy D.) Subordination B.) Tenants in common The economic concept which states that a knowledgeable buyer will pay no more for one property than they would pay for an equally desirable comparable property is: A.) Principle of Substitution A.) Principle of Substitution B.) Principle of Highest and Best Use C.) Principle of Market Value D.) Principle of Intelligent Purchases Which law allows consumers a free copy of their credit report every year? A.) Homeowner's Protection Act B.) The Fair and Accurate Credit Transaction Act C.) Truth-in-Lending D.) The Equal Credit Opportunity Act B.) The Fair and Accurate Credit Transaction Act Which law required the interviewer to complete the Government Monitoring section on the 1003? A.) Homeowner's Protection Act B.) The Fair and Accurate Credit Transaction Act C.) Truth-in-Lending D.) The Equal Credit Opportunity Act D.) The Equal Credit Opportunity Act Which law entitles an applicant to a copy of his property appraisal report? A.) Homeowner's Protection Act B.) The Fair and Accurate Credit Transaction Act C.) Truth-in-Lending D.) The Equal Credit Opportunity Act D.) The Equal Credit Opportunity Act Which law is also known as Regulation X A.) Truth in Lending 11 / 12 B.) Real Estate Settlement Procedures Act C.) Homeowner's Protection Act D.) The Equal Credit Opportunity Act B.) Real Estate Settlement Procedures Act Which law protects an individual's confidential information? A.) Truth in Lending B.) Real Estate Settlement Procedures Act C.) Homeowner's Protection Act D.) Gramm-Leach-Bliley Act D.) Gramm-Leach-Bliley Act Who enforces RESPA violations? A.) FTC B.) CFPB C.) FHA D.) FCC B.) CFPB Which law requires that the Special Information booklet be given to borrowers? A.) Truth in Lending B.) Real Estate Settlement Procedures Act C.) Homeowner's Protection Act D.) The Equal Credit Opportunity Act B.) Real Estate Settlement Procedures Act What is the fine for violating the Federal Do Not Call Rules? A.) $5,000 B.) $11,000 C.) $16,000 D.) $20,000 C.) $16,000 12 / 12