Free Finance Practice Test — LicenseIQ

Question 1

The periodic report a property manager gives the owner showing rents and other income collected and expenses paid for the period is the:

Accepted Answer

The income statement (P&L) summarizes income and expenses for the accounting period, typically monthly.

Question 2

A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

Accepted Answer

At 95% LTV the down payment is 5% of price. Price = $18,000 / 0.05 = $360,000; loan = $342,000.

Question 3

A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

Accepted Answer

USDA Rural Development loans serve eligible rural buyers who meet income limits, often with no down payment.

Question 4

The minimum down payment typically required on an FHA-insured loan is as low as:

Accepted Answer

FHA allows down payments as low as 3.5%. Zero down is associated with VA and USDA loans.

Question 5

Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?

Accepted Answer

$250,000 / $1,000 = 250; 250 x 4.77415 = $1,193.54.

Question 6

RESPA primarily governs:

Accepted Answer

RESPA requires disclosure of settlement (closing) costs on 1-4 family residential loans and prohibits kickbacks. Rate advertising falls under TILA.

Question 7

A lender approves a $276,000 loan and the buyer wants to keep an 80% LTV. What is the maximum purchase price?

Accepted Answer

Purchase price = loan / LTV = $276,000 / 0.80 = $345,000. ($220,800 wrongly multiplies by 0.80.)

Question 8

A property has a first mortgage (recorded 2015), a judgment lien (2018), a mechanic's lien (2020) and unpaid property taxes. Which is paid FIRST from sale proceeds?

Accepted Answer

Real property tax liens take priority over all others regardless of recording date; other liens generally follow in order of recording.

Question 9

The document issued by a VA-approved appraiser for a VA loan is the:

Accepted Answer

The VA appraiser issues a CRV. The Certificate of Eligibility establishes the veteran's entitlement before applying.

Question 10

Which document is recorded in the county records and makes the property collateral for a loan?

Accepted Answer

The mortgage creates the lien and is recorded. The promissory note is the borrower's personal promise to repay and is not recorded.

Question 11

On the buyer's side of the closing statement, the earnest money deposit and the new mortgage loan are both:

Accepted Answer

Earnest money and loan proceeds are sources of funds that reduce what the buyer must bring, so they are buyer credits.

Question 12

A buyer purchases a $300,000 home with an 80% loan, pays 1 point on the loan, a $450 appraisal and $1,800 in title charges, and has already deposited $10,000 earnest money. How much must the buyer bring to closing?

Accepted Answer

Down payment = $60,000; 1 point = $240,000 x 0.01 = $2,400; total = $60,000 + $2,400 + $450 + $1,800 = $64,650; minus $10,000 earnest money = $54,650.

Question 13

Which loan is insured by the federal government and allows a low down payment?

Accepted Answer

FHA loans are insured by the Federal Housing Administration and permit down payments as low as 3.5%. Conventional loans are not government-backed.

Question 14

Under the Truth in Lending Act (Regulation Z), which phrase in an ad is a 'trigger term' requiring full credit disclosures?

Accepted Answer

Specific terms like the down payment amount, number or amount of payments, finance charge or repayment period trigger full disclosure (including APR). General statements do not.

Question 15

In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

Accepted Answer

Early payments are mostly interest; as the balance declines, more of each payment goes to principal.

Question 16

One discount point equals what percentage of the loan amount?

Accepted Answer

One point = 1% of the loan amount (not the purchase price), paid to lower the interest rate.

Question 17

A buyer purchases a home for $425,000 with a loan of $361,250. What is the LTV?

Accepted Answer

LTV = loan / price = $361,250 / $425,000 = 0.85 = 85%. (15% is the down payment percentage.)

Question 18

A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

Accepted Answer

Loans above the conforming limits cannot be sold to Fannie Mae/Freddie Mac and are non-conforming 'jumbo' loans, usually at higher rates.

Question 19

The reasonably probable use of a property that is legally permissible, physically possible, financially feasible and maximally productive is its:

Accepted Answer

Highest and best use is the use producing the greatest value that meets the four tests.

Question 20

Under TRID, the borrower must receive the Closing Disclosure at least how long before loan closing?

Accepted Answer

The Loan Estimate is due within 3 business days after application, and the Closing Disclosure at least 3 business days before closing.

Question 21

On a $250,000 loan, how much is 2 discount points?

Accepted Answer

1 point = 1% of the loan. 2 points = 0.02 x $250,000 = $5,000.

Question 22

A home is worth $410,000. The owner owes $238,500 on a first mortgage and $41,200 on a home equity loan. What is the owner's equity?

Accepted Answer

Equity = value - all loan balances = $410,000 - ($238,500 + $41,200) = $410,000 - $279,700 = $130,300.

Question 23

A lender's refusal to make loans in certain neighborhoods based on demographics is:

Accepted Answer

Redlining is denying loans or services to areas based on protected characteristics rather than the borrower's qualifications.

Question 24

An agent tells a buyer he will show homes only if the buyer uses the agent's brother as mortgage broker. This is an illegal:

Accepted Answer

Conditioning one service on the purchase of another is a tying arrangement prohibited by antitrust law.

Question 25

A VA loan is:

Accepted Answer

VA loans are guaranteed (not insured) by the VA for eligible veterans and service members, often with no down payment, and only for a primary residence.

National real estate finance practice test

1. The periodic report a property manager gives the owner showing rents and other income collected and expenses paid for the period is the:

2. A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

3. A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

4. The minimum down payment typically required on an FHA-insured loan is as low as:

5. Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?

6. RESPA primarily governs:

7. A lender approves a $276,000 loan and the buyer wants to keep an 80% LTV. What is the maximum purchase price?

8. A property has a first mortgage (recorded 2015), a judgment lien (2018), a mechanic's lien (2020) and unpaid property taxes. Which is paid FIRST from sale proceeds?

9. The document issued by a VA-approved appraiser for a VA loan is the:

10. Which document is recorded in the county records and makes the property collateral for a loan?

11. On the buyer's side of the closing statement, the earnest money deposit and the new mortgage loan are both:

12. A buyer purchases a $300,000 home with an 80% loan, pays 1 point on the loan, a $450 appraisal and $1,800 in title charges, and has already deposited $10,000 earnest money. How much must the buyer bring to closing?

13. Which loan is insured by the federal government and allows a low down payment?

14. Under the Truth in Lending Act (Regulation Z), which phrase in an ad is a 'trigger term' requiring full credit disclosures?

15. In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

16. One discount point equals what percentage of the loan amount?

17. A buyer purchases a home for $425,000 with a loan of $361,250. What is the LTV?

18. A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

19. The reasonably probable use of a property that is legally permissible, physically possible, financially feasible and maximally productive is its:

20. Under TRID, the borrower must receive the Closing Disclosure at least how long before loan closing?

21. On a $250,000 loan, how much is 2 discount points?

22. A home is worth $410,000. The owner owes $238,500 on a first mortgage and $41,200 on a home equity loan. What is the owner's equity?

23. A lender's refusal to make loans in certain neighborhoods based on demographics is:

24. An agent tells a buyer he will show homes only if the buyer uses the agent's brother as mortgage broker. This is an illegal:

25. A VA loan is:

Sources