Free Minnesota Finance Practice Test — LicenseIQ

Question 1

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 2

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 3

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 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

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 6

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 7

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 8

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 9

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 10

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 11

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 12

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 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

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 15

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 16

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 17

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 18

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 19

A buyer obtains a $280,000 mortgage loan. What is the Minnesota mortgage registry tax?

Accepted Answer

280,000 x 0.0023 = $644. The $924 distractor applies the deed tax rate (280,000 x 0.0033).

Question 20

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 21

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 22

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 23

A property sells for $300,000. The buyer assumes the seller's existing $120,000 mortgage, which remains on the property. What is the state deed tax?

Accepted Answer

Net consideration excludes liens remaining at the time of sale: 300,000 - 120,000 = 180,000. Deed tax: 180,000 x 0.0033 = $594. Taxing the full price gives $990, the tempting error.

Question 24

Who is liable for Minnesota's mortgage registry tax?

Accepted Answer

Section 287.035 states that the person liable for the mortgage registry tax is the mortgagor (the borrower).

Question 25

A mortgage's original principal was $250,000. At the date of the foreclosure notice, $160,000 is claimed due on a single-family lot of under 10 acres. What redemption period applies?

Accepted Answer

160,000 / 250,000 = 0.64, which is below 0.6667 (66-2/3 percent). Section 580.23, subd. 2 extends redemption to 12 months in that case.

Minnesota real estate finance practice test

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

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

3. 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) .

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

6. 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:

7. 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?

8. 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:

9. 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?

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

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

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

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

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

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

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

17. 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?

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

19. A buyer obtains a $280,000 mortgage loan. What is the Minnesota mortgage registry tax?

20. 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?

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

22. 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:

23. A property sells for $300,000. The buyer assumes the seller's existing $120,000 mortgage, which remains on the property. What is the state deed tax?

24. Who is liable for Minnesota's mortgage registry tax?

25. A mortgage's original principal was $250,000. At the date of the foreclosure notice, $160,000 is claimed due on a single-family lot of under 10 acres. What redemption period applies?

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