Free Delaware Finance Practice Test — LicenseIQ

Question 1

A borrower paid $3,150 in points on a $210,000 loan. How many points were paid?

Accepted Answer

Points = cost / loan = $3,150 / $210,000 = 0.015 = 1.5 points (1 point = 1% of the loan).

Question 2

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 3

A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

Accepted Answer

LTV is applied to the LESSER of price or appraised value: $290,000 x 0.75 = $217,500. Using the $300,000 price ($225,000) is the common mistake.

Question 4

A home sells for $389,000. The seller pays a 5% commission, a $212,600 mortgage payoff, $1,200 attorney fee, $1,950 transfer tax and $600 in other costs. What are the seller's net proceeds?

Accepted Answer

Commission = $389,000 x 0.05 = $19,450. Total costs = $19,450 + $212,600 + $1,200 + $1,950 + $600 = $235,800. Net = $389,000 - $235,800 = $153,200.

Question 5

Under federal rules, a lender must automatically cancel borrower-paid PMI when the loan balance reaches what percentage of the original value (purchase price)?

Accepted Answer

PMI terminates automatically at 78% LTV based on original value. At 80% LTV the borrower may REQUEST cancellation, which is the tempting distractor.

Question 6

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 7

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 8

A buyer purchases a $300,000 home with a $60,000 down payment. What is the loan-to-value (LTV) ratio?

Accepted Answer

Loan = $300,000 - $60,000 = $240,000; $240,000 / $300,000 = 80% LTV. (20% is the down payment percentage.)

Question 9

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 10

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 11

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 12

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 13

On an adjustable-rate mortgage, the interest rate after the initial period is determined by:

Accepted Answer

ARM rate = index + margin, subject to periodic and lifetime caps. In a 5/1 ARM the rate is fixed 5 years, then adjusts every year.

Question 14

A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

Accepted Answer

When unpaid interest is added to principal, the balance grows - negative amortization. An interest-only loan pays all interest, so the balance stays flat.

Question 15

A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

Accepted Answer

An alienation (due-on-sale) clause lets the lender call the loan due upon transfer, preventing assumption without lender approval.

Question 16

Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

Accepted Answer

PMI protects the lender and is generally required when the borrower puts down less than 20% (LTV over 80%).

Question 17

A borrower pays $4,500 for 1.5 discount points. What is the loan amount?

Accepted Answer

Loan = cost of points / points as a percentage = $4,500 / 0.015 = $300,000.

Question 18

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 19

A financing contingency in a purchase agreement protects the:

Accepted Answer

A financing (mortgage) contingency lets the buyer cancel without penalty if unable to secure the specified loan by the deadline.

Question 20

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 21

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 22

A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

Accepted Answer

RESPA prohibits kickbacks and unearned referral fees between settlement service providers and real estate licensees, even if disclosed.

Question 23

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 24

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 25

A licensee actually knows a buyer's gift letter is false. Under §2929, the licensee must:

Accepted Answer

§2929: no duty to verify, but with actual knowledge of falsity the licensee must advise correction and not convey it.

Delaware real estate finance practice test

1. A borrower paid $3,150 in points on a $210,000 loan. How many points were paid?

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

3. A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

4. A home sells for $389,000. The seller pays a 5% commission, a $212,600 mortgage payoff, $1,200 attorney fee, $1,950 transfer tax and $600 in other costs. What are the seller's net proceeds?

5. Under federal rules, a lender must automatically cancel borrower-paid PMI when the loan balance reaches what percentage of the original value (purchase price)?

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

7. 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?

8. A buyer purchases a $300,000 home with a $60,000 down payment. What is the loan-to-value (LTV) ratio?

9. RESPA primarily governs:

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

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

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

13. On an adjustable-rate mortgage, the interest rate after the initial period is determined by:

14. A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

15. A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

16. Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

17. A borrower pays $4,500 for 1.5 discount points. What is the loan amount?

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

19. A financing contingency in a purchase agreement protects the:

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

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

22. A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

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

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

25. A licensee actually knows a buyer's gift letter is false. Under §2929, the licensee must:

Sources