Free South Dakota Finance Practice Test — LicenseIQ

Question 1

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 2

The minimum down payment typically required on an FHA-insured loan is as low as:

Accepted Answer

FHA allows down payments as low as 3.5%. Zero down is associated with VA and USDA loans.

Question 3

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 4

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 5

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 6

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 7

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 8

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 9

A lender's loan officer tells an appraiser that future assignments depend on the appraisal 'hitting the contract price.' A licensee who joins in that pressure is:

Accepted Answer

36-21A-71(40) prohibits improperly influencing an appraisal through coercion or conditioning future work on a predetermined value. Providing additional property information is a listed exception, but threats are not.

Question 10

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 11

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 12

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 13

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 14

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 15

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 16

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 17

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 18

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 19

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 20

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 21

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 22

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 23

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 24

A married South Dakota resident owns the family home in her name alone and lives there with her resident spouse. To mortgage the home she needs:

Accepted Answer

43-31-17 requires both resident spouses to concur in and sign a conveyance or encumbrance of the homestead.

Question 25

A broker associate drafts two purchase agreements with different prices, giving only the higher one to the lender to obtain a larger loan. This is:

Accepted Answer

36-21A-71(18) prohibits using two or more contracts, with one withheld from the lender, to obtain a larger loan.

South Dakota real estate finance practice test

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

2. The minimum down payment typically required on an FHA-insured loan is as low as:

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

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

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

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

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

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

9. A lender's loan officer tells an appraiser that future assignments depend on the appraisal 'hitting the contract price.' A licensee who joins in that pressure is:

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

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

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

13. A VA loan is:

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

15. 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?

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

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

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

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

20. 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?

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

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

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

24. A married South Dakota resident owns the family home in her name alone and lives there with her resident spouse. To mortgage the home she needs:

25. A broker associate drafts two purchase agreements with different prices, giving only the higher one to the lender to obtain a larger loan. This is:

Sources