Free Iowa Finance Practice Test — LicenseIQ

Question 1

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 2

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 3

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 4

Which statement about FHA-insured loans is correct?

Accepted Answer

FHA loans are made by approved lenders and insured by FHA, with down payments as low as 3.5% and mortgage insurance premium (MIP) required on all FHA loans, for 1-4 family homes.

Question 5

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 6

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 7

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 8

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 9

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 10

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 11

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 12

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.

Question 13

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 14

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 15

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 16

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 17

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 18

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 19

Under a land contract (contract for deed), during the payment period the buyer holds:

Accepted Answer

In an installment/land contract the buyer has equitable title and possession; the seller keeps legal title until the final payment.

Question 20

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 21

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 22

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 23

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 24

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 25

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.

Iowa real estate finance practice test

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

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

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

4. Which statement about FHA-insured loans is correct?

5. 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?

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

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

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

9. 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:

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

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

12. A VA loan is:

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

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

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

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

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

18. 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:

19. Under a land contract (contract for deed), during the payment period the buyer holds:

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

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

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

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

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

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

Sources