Free Maine 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 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 3

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 4

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 5

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 6

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 7

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 8

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 9

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 10

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 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 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 13

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 14

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 15

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 16

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 17

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 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

Adding a new financing contingency to an existing sales contract is done by a(n) ____, while changing the existing closing date is done by a(n) ____.

Accepted Answer

An addendum ADDs new terms; an amendment changes existing terms. Both require agreement of both parties.

Question 20

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 21

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 22

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 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

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

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.

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

3. 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?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

19. Adding a new financing contingency to an existing sales contract is done by a(n) , while changing the existing closing date is done by a(n) .

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

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

22. 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?

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

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

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

Sources