Free Idaho Finance Practice Test — LicenseIQ

Question 1

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 2

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 3

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 4

A short-term loan used to buy a new home before the borrower's current home sells is a:

Accepted Answer

A bridge loan 'bridges' the gap between buying and selling and is typically repaid within about 12 months when the old home sells.

Question 5

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 6

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 7

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 8

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 9

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 10

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 11

A buyer purchases a $275,000 home with an 80% LTV loan and pays 2.5 discount points. What do the points cost?

Accepted Answer

Loan = $275,000 x 0.80 = $220,000; points = $220,000 x 0.025 = $5,500. ($6,875 wrongly applies points to the price.)

Question 12

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 13

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 14

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 15

The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

Accepted Answer

The acceleration clause lets the lender call the entire debt due on default. The alienation (due-on-sale) clause is triggered by transfer of the property.

Question 16

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 17

A chronological summary of all recorded documents affecting a property's title, such as deeds, mortgages and liens, is a(n):

Accepted Answer

The abstract summarizes the recorded history; the chain of title lists successive owners; an attorney's opinion of title evaluates it.

Question 18

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 19

Which federal law requires disclosure of the true cost of credit, including APR?

Accepted Answer

The Truth in Lending Act (Regulation Z) requires disclosure of finance charges and the APR. RESPA covers settlement costs.

Question 20

A lender wants to secure a loan on a 70-acre rural parcel used mainly for raising cattle, outside any city. Can a deed of trust be used?

Accepted Answer

45-1502's 80-acre allowance applies only to property not principally used for agriculture. Agricultural land outside a city falls under the 40-acre limit, so 70 acres does not qualify.

Question 21

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 22

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 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

A loan whose payments are not large enough to pay it off by the end of the term, leaving a large final payment, is a:

Accepted Answer

Partially amortized loans require a balloon payment at maturity. Negative amortization means the balance actually increases because payments don't cover interest.

Question 25

A lender asks an Idaho salesperson for a written broker price opinion for a refinance decision. What is correct?

Accepted Answer

54-2038 reserves BPOs to actively licensed brokers and associate brokers. A salesperson may give price opinions only in the ordinary course of business, such as for a prospective listing.

Idaho real estate finance practice test

1. 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?

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

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

4. A short-term loan used to buy a new home before the borrower's current home sells is a:

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

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

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

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

9. 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:

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

11. A buyer purchases a $275,000 home with an 80% LTV loan and pays 2.5 discount points. What do the points cost?

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

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

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

15. The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

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

17. A chronological summary of all recorded documents affecting a property's title, such as deeds, mortgages and liens, is a(n):

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

19. Which federal law requires disclosure of the true cost of credit, including APR?

20. A lender wants to secure a loan on a 70-acre rural parcel used mainly for raising cattle, outside any city. Can a deed of trust be used?

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

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

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

24. A loan whose payments are not large enough to pay it off by the end of the term, leaving a large final payment, is a:

25. A lender asks an Idaho salesperson for a written broker price opinion for a refinance decision. What is correct?

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