Free Maryland Finance Practice Test — LicenseIQ

Question 1

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 2

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 3

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 4

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 5

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 6

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 7

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 8

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 9

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 10

In a mortgage, the borrower who pledges the property as security is the:

Accepted Answer

The mortgagor (borrower) gives the mortgage to the mortgagee (lender) in exchange for the loan.

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

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 13

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 14

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 15

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 16

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 17

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 18

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 19

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 20

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 21

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 22

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 23

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 24

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 25

A buyer pays $180,000 cash and assumes the seller's $220,000 mortgage. The buyer is not a first-time homebuyer. What is the Maryland State transfer tax?

Accepted Answer

§13-203(a)(2) includes any assumed mortgage in consideration: $180,000 + $220,000 = $400,000; × 0.005 = $2,000. Taxing only the cash gives $900.

Maryland real estate finance practice test

1. 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?

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

3. 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:

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

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

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

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

8. 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?

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

10. In a mortgage, the borrower who pledges the property as security is the:

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

12. RESPA primarily governs:

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

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

15. 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:

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

17. A VA loan is:

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

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

20. 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) .

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

22. 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?

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

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

25. A buyer pays $180,000 cash and assumes the seller's $220,000 mortgage. The buyer is not a first-time homebuyer. What is the Maryland State transfer tax?

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