Free New Mexico Finance Practice Test — LicenseIQ

Question 1

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 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

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 4

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 5

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 6

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 7

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 8

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 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

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 11

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 12

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 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 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 16

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 17

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 18

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 19

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 20

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 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

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 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 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 25

Which mortgage of community real property does NOT require both spouses' joinder?

Accepted Answer

40-3-13 excepts purchase-money mortgages from the joinder requirement. Other mortgages of community real property require both spouses.

New Mexico real estate finance practice test

1. RESPA primarily governs:

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

3. 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?

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

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

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

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

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

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

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

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

12. 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?

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

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

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

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

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

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

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

22. 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) .

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

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

25. Which mortgage of community real property does NOT require both spouses' joinder?

Sources