NMLS SAFE MLO — Mortgage Loan Originator — All Questions
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400 questions
On an FHA loan, the upfront mortgage insurance premium (UFMIP) is most often handled how?
- a.Financed into the loan amount✓
- b.Paid to the appraiser
- c.Waived for first-time buyers
- d.Paid by the seller only
FHA borrowers commonly finance the UFMIP by adding it to the base loan amount, though it can be paid in cash. It is not automatically waived, seller-only, or paid to the appraiser.FHA
The VA funding fee is best described as:
- a.A one-time fee that helps sustain the VA loan program✓
- b.A monthly mortgage insurance premium
- c.A property tax
- d.A discount point
The VA funding fee is a one-time charge (often financed) that offsets taxpayer cost and can be waived for certain disabled veterans; VA loans have no monthly mortgage insurance. It is not a discount point or a property tax.VA
A conventional 97 program allows financing up to 97% LTV. On a $300,000 home, what is the minimum down payment under this program?
- a.$10,500
- b.$15,000
- c.$9,000✓
- d.$3,000
At 97% LTV the borrower puts down 3%: 3% x $300,000 = $9,000. $10,500 is 3.5% (FHA), $15,000 is 5%, and $3,000 is only 1%.
A common conventional qualifying guideline is a 28/36 ratio. For a borrower earning $6,000 gross monthly, what is the maximum total monthly debt (including PITI) under the 36 figure?
- a.$2,520
- b.$1,680
- c.$2,000
- d.$2,160✓
The 36 refers to a 36% back-end ratio: 36% x $6,000 = $2,160 maximum total debt. $1,680 is the 28% housing figure, not the total-debt limit.
The three main national consumer credit reporting bureaus used in mortgage lending are:
- a.Equifax, Experian, and TransUnion✓
- b.HUD, CFPB, and FTC
- c.FHA, VA, and USDA
- d.Fannie, Freddie, and Ginnie
Equifax, Experian, and TransUnion are the three major credit bureaus that produce the reports and scores used in underwriting. The other lists are loan programs, secondary-market entities, or regulators — not credit bureaus.
Loan-to-value (LTV) is calculated as:
- a.Loan amount divided by the lesser of purchase price or appraised value✓
- b.Down payment divided by loan
- c.Value minus loan
- d.Income divided by debt
LTV = loan amount / (the lesser of the sales price or appraised value), expressed as a percentage. The other formulas describe DTI or unrelated relationships.
A borrower buys a $525,000 home and finances $420,000. What is the LTV?
- a.80%✓
- b.75%
- c.90%
- d.85%
LTV = $420,000 / $525,000 = 80%. The other percentages do not equal the loan divided by the price.
A property appraises at $250,000. The borrower has a first mortgage of $150,000 and wants a second mortgage of $37,500. What is the resulting CLTV?
- a.80%
- b.75%✓
- c.70%
- d.60%
CLTV = ($150,000 + $37,500) / $250,000 = $187,500 / $250,000 = 75%. 60% counts only the first mortgage; the others do not match.
A borrower's gross monthly income is $4,000 and the proposed PITI is $1,200. What is the front-end ratio?
- a.33%
- b.28%
- c.30%✓
- d.25%
Front-end ratio = $1,200 / $4,000 = 30%. The other percentages do not equal PITI divided by gross income.
Gross monthly income is $12,000. PITI is $3,000 and other monthly debts are $1,800. What is the back-end DTI?
- a.40%✓
- b.36%
- c.25%
- d.30%
Back-end DTI = ($3,000 + $1,800) / $12,000 = $4,800 / $12,000 = 40%. 25% is the front-end ratio; the others omit part of the debt.
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P&I is $900/month, annual taxes are $2,400, annual insurance is $1,200, and there is no PMI. What is the monthly PITI?
- a.$1,200✓
- b.$1,300
- c.$1,100
- d.$900
PITI = $900 + ($2,400/12) + ($1,200/12) = $900 + $200 + $100 = $1,200. The other totals miscount the monthly escrow.
On a $180,000 loan, a borrower pays 2.5 discount points. What is the cost?
- a.$4,500✓
- b.$5,400
- c.$3,600
- d.$1,800
Cost = 2.5% x $180,000 = $4,500. $3,600 is two points, $1,800 is one point, and $5,400 is three points.TILA / Regulation Z
A 5/1 ARM starts at 3.50%. At the first adjustment the index + margin equals 6.25%, and the initial cap is 2%. What is the new rate?
- a.5.50%✓
- b.6.00%
- c.6.25%
- d.3.50%
The initial 2% cap limits the increase: 3.50% + 2% = 5.50%, which is below the 6.25% fully indexed rate. It cannot reach 6.25% this period and does rise above the 3.50% start.
A note rate is 6.50%. During the first year of a 2-1 buydown, what rate does the borrower pay, and what rate applies in year two?
- a.5.50% then 6.50%
- b.3.50% then 4.50%
- c.6.50% then 5.50%
- d.4.50% then 5.50%✓
A 2-1 buydown lowers the rate 2% in year one and 1% in year two: 6.50% - 2% = 4.50% (year one), then 6.50% - 1% = 5.50% (year two). The note rate 6.50% resumes in year three.
On a $400,000 FHA purchase with the minimum down payment, what is the maximum base loan amount (before financing UFMIP)?
- a.$390,000
- b.$380,000
- c.$386,000✓
- d.$372,000
FHA maximum financing is 96.5%: 0.965 x $400,000 = $386,000 (a 3.5% / $14,000 down payment). $380,000 is 95%, $372,000 is 93%, and $390,000 does not match 96.5%.FHA
A loan balance is $150,000 at an annual rate of 4.8%. How much of the next monthly payment is interest?
- a.$620
- b.$500
- c.$720
- d.$600✓
Monthly interest = $150,000 x (0.048/12) = $150,000 x 0.004 = $600. $720 uses 5.76%/12 incorrectly; the others do not match 0.4% per month.
A home is worth $450,000. A borrower wants a first mortgage of $315,000 and a second of $22,500. What is the CLTV?
- a.80%
- b.70%
- c.72%
- d.75%✓
CLTV = ($315,000 + $22,500) / $450,000 = $337,500 / $450,000 = 75%. 70% counts only the first mortgage; the others do not match.
A borrower earns $6,500 gross monthly. Using a 28% housing ratio, what is the maximum PITI the borrower qualifies for?
- a.$1,625
- b.$1,820✓
- c.$1,950
- d.$2,080
Max PITI = 28% x $6,500 = $1,820. $1,625 uses 25%, $1,950 uses 30%, and $2,080 uses 32% — none match the stated 28%.
USDA guaranteed loans charge an upfront guarantee fee and an annual fee. These fees are most similar in purpose to which of the following?
- a.Homeowner's association dues
- b.Property taxes
- c.FHA's upfront and annual MIP✓
- d.A discount point
Like FHA's upfront and annual MIP, USDA's upfront guarantee fee and annual fee fund the program's insurance against default. They are not discount points, property taxes, or HOA dues.USDA
On many FHA loans with the minimum down payment, the annual MIP generally remains for what duration?
- a.Until 80% LTV only
- b.It never applies
- c.For the life of the loan✓
- d.For exactly 5 years
For FHA loans with less than 10% down, annual MIP typically remains for the life of the loan, unlike conventional PMI, which can cancel around 78–80% LTV. It is not limited to five years and does apply.FHA
Which of the following is an example of an index that can be used to set the rate on an adjustable-rate mortgage?
- a.SOFR (Secured Overnight Financing Rate)✓
- b.The borrower's FICO score
- c.The origination fee
- d.The loan's margin
SOFR is a common market index used to adjust ARM rates. The margin is added to the index (not the index itself), and the FICO score and origination fee are unrelated to the ARM index.
On an ARM, the initial 'start' or 'teaser' rate is best described as:
- a.The permanent rate
- b.The margin
- c.The lifetime cap
- d.A temporarily low introductory rate that later adjusts✓
The teaser (start) rate is a lower introductory rate for the initial fixed period; the rate later adjusts based on index plus margin subject to caps. It is not the cap, the margin, or a permanent rate.
In underwriting, 'reserves' generally refer to:
- a.Unpaid interest
- b.The lender's profit
- c.Liquid assets a borrower has left after closing, often measured in months of PITI✓
- d.Property taxes owed
Reserves are the borrower's remaining liquid assets after down payment and closing costs, commonly expressed as a number of months of PITI, showing ability to keep paying if income is interrupted. They are not lender profit, unpaid interest, or taxes.
When a borrower uses gift funds for a down payment, the lender typically requires:
- a.Nothing, gifts are never allowed
- b.Repayment within one year
- c.A gift letter stating the funds are not a loan✓
- d.That the donor co-sign the loan
Lenders generally allow gift funds from eligible donors but require a gift letter confirming the money need not be repaid, plus documentation of the transfer. Gifts are permitted, need not be repaid, and the donor is not required to co-sign.
How does a permanent buydown differ from a temporary buydown?
- a.Neither changes the payment
- b.A permanent buydown lowers the note rate for the full loan term, while a temporary buydown reduces the rate only for the first years✓
- c.A permanent buydown only lasts one year
- d.A temporary buydown lasts the whole term
A permanent buydown (paying discount points) lowers the note rate for the entire term, whereas a temporary buydown (like 2-1) reduces the effective rate only for the initial years before reverting to the note rate. Both do change the payment.
A convertible ARM gives the borrower the option to:
- a.Increase the loan amount
- b.Convert to a fixed rate during a specified window, often for a fee✓
- c.Skip payments
- d.Remove the property tax escrow
A convertible ARM includes a conversion feature allowing the borrower to switch to a fixed rate during a set period, usually for a fee, without a full refinance. It does not permit skipping payments, removing escrow, or increasing the loan.
Under TRID, a mortgage 'application' is legally triggered when the consumer submits which set of information?
- a.Name, Social Security number, and proof of homeowners insurance
- b.Name, income, SSN, property address, estimated property value, and loan amount sought✓
- c.A completed Form 1003 signed by the borrower and co-borrower
- d.Name, income, and a signed purchase contract only
Under TRID an application consists of six specific pieces of information: name, income, Social Security number, property address, an estimate of the property's value, and the loan amount sought. A signed Form 1003 is not required; once the creditor has all six pieces, the Loan Estimate clock starts.TRID
A loan officer receives the borrower's name, income, SSN, subject property address, an estimate of the property's value, and the requested loan amount on Monday. When does the three-business-day Loan Estimate clock begin?
- a.After the appraisal is completed
- b.After the borrower pays the application fee
- c.Immediately on Monday, because all six pieces of an application have now been received✓
- d.Only after the borrower signs Form 1003
The six pieces of information are complete, so an 'application' exists and the LE clock starts the day they are received. The creditor must deliver or mail the Loan Estimate within three business days. No signature or fee payment is needed to start the clock.TRID
Which of the following is NOT one of the six pieces of information that constitute an application under TRID?
- a.The consumer's employer's address✓
- b.The loan amount sought
- c.An estimate of the value of the property
- d.The consumer's Social Security number
The six pieces are name, income, SSN, property address, estimated property value, and loan amount sought. The employer's address is not among them. Collecting it may be part of processing, but it does not affect whether an application exists.TRID
The creditor must deliver or place in the mail the Loan Estimate no later than how many business days after receiving the application?
- a.1 business day
- b.7 business days
- c.3 business days✓
- d.2 business days
The Loan Estimate must be delivered or placed in the mail no later than three business days after the creditor receives the consumer's application. This is a core TRID timing rule.TRID
In addition to being provided within three business days of application, the Loan Estimate must be received by the consumer no later than how many business days before consummation?
- a.1 business day
- b.7 business days✓
- c.5 business days
- d.3 business days
The consumer must receive the Loan Estimate no later than seven business days before consummation. This ensures the borrower has time to review the estimated terms before becoming obligated on the loan.TRID
The consumer must receive the Closing Disclosure at least how long before consummation?
- a.1 business day
- b.7 business days
- c.3 calendar days
- d.3 business days✓
The Closing Disclosure must be received by the consumer at least three business days before consummation. This waiting period gives the borrower time to review the final terms and costs.TRID
For the Closing Disclosure's three-business-day waiting period, 'business day' is defined as:
- a.Monday through Friday only
- b.Any day the creditor's offices are open to the public
- c.All calendar days except weekends
- d.All calendar days except Sundays and legal public holidays✓
For the CD waiting period and other precise timing rules, 'business day' uses the more specific definition: all calendar days except Sundays and legal public holidays. That means Saturdays generally count as business days.TRID
For counting the three days to deliver the Loan Estimate, 'business day' means:
- a.All calendar days except Sundays and federal holidays
- b.Any day the Federal Reserve is open
- c.A day the creditor is open to the public for carrying out substantially all of its business functions✓
- d.Monday through Saturday, always
The three-day LE delivery period uses the general definition of 'business day': a day on which the creditor's offices are open to the public for carrying out substantially all of its business functions. This differs from the more precise definition used for the CD waiting period.TRID
Before the consumer has received the Loan Estimate and communicated intent to proceed, the creditor may collect which fee?
- a.An appraisal fee
- b.A processing fee
- c.A loan application fee
- d.A bona fide and reasonable fee for obtaining the consumer's credit report✓
The only fee a creditor may collect before the consumer receives the LE and indicates intent to proceed is a bona fide and reasonable charge for obtaining the consumer's credit report. All other fees must wait until intent to proceed is communicated.TRID
Which of the following qualifies as the consumer's 'intent to proceed' with the transaction?
- a.The consumer simply providing the six pieces of information
- b.Any affirmative oral or written communication from the consumer that they wish to move forward, after receiving the LE✓
- c.The consumer's silence for seven business days
- d.Signing the initial Form 1003
Intent to proceed is any affirmative act, oral or written, by which the consumer communicates a desire to move forward after receiving the Loan Estimate. Silence does not constitute intent to proceed, and it cannot occur before the LE is received.TRID
When a valid changed circumstance justifies a revised Loan Estimate, the creditor must deliver or mail it within how many business days of receiving information sufficient to establish the change?
- a.1 business day
- b.7 business days
- c.3 business days✓
- d.4 business days
After a valid changed circumstance, the creditor must provide a revised Loan Estimate within three business days of receiving information sufficient to establish that the changed circumstance occurred. This resets the applicable tolerance baseline for the affected charges.TRID
A revised Loan Estimate must be received by the consumer no later than how many business days before consummation?
- a.3 business days
- b.1 business day
- c.7 business days
- d.4 business days✓
A revised Loan Estimate must be received by the consumer no later than four business days before consummation. Because the consumer must also receive the Closing Disclosure three business days before consummation, a revised LE cannot be issued on or after the CD is provided.TRID
Which charge is subject to a zero percent tolerance (cannot increase from the LE to the CD)?
- a.Homeowners insurance premium
- b.The loan origination fee charged by the creditor✓
- c.Prepaid interest
- d.A recording fee
Fees paid to the creditor, mortgage broker, or an affiliate, and charges for services the consumer cannot shop for provided by an affiliate, are subject to zero tolerance. The creditor's own origination fee cannot increase from the LE to the CD.TRID
Which fee falls under the 10 percent cumulative tolerance category?
- a.The creditor's underwriting fee
- b.Recording fees✓
- c.Transfer taxes
- d.Prepaid interest
Recording fees, along with charges for third-party services the consumer can shop for when the consumer selects a provider from the creditor's written list, fall under the 10 percent cumulative tolerance. These charges may rise, but only up to 10 percent in the aggregate.TRID
Which of the following is generally subject to NO tolerance limitation (may change without violating good faith)?
- a.Recording fees
- b.The lender's origination charge
- c.Transfer taxes
- d.Prepaid interest (per-diem interest)✓
Prepaid (per-diem) interest is in the 'no tolerance' category, meaning it may change from the LE to the CD without violating good faith. Also in this category are property insurance premiums, escrow amounts, and services the consumer shops for using a provider not on the creditor's list.TRID
A borrower chooses a title company that is NOT on the creditor's written list of providers. Into which tolerance category does that title service fee fall?
- a.A separate transfer-tax tolerance
- b.10 percent cumulative tolerance
- c.Zero tolerance
- d.No tolerance✓
When the consumer shops for a service and selects a provider that is not on the creditor's written list, that charge is in the 'no tolerance' category. Because the consumer went off-list, the creditor's estimate is not held to a strict tolerance for that charge.TRID
A borrower selects a pest-inspection provider FROM the creditor's written list of service providers. That charge is subject to which tolerance?
- a.10 percent cumulative tolerance✓
- b.No tolerance
- c.A separate 25 percent tolerance
- d.Zero tolerance
When the consumer can shop for a service and selects a provider from the creditor's written list, the charge falls in the 10 percent cumulative tolerance category. Staying on the list keeps the charge within the aggregate 10 percent limit.TRID
Transfer taxes disclosed on the Loan Estimate are subject to which tolerance?
- a.10 percent tolerance
- b.15 percent tolerance
- c.Zero tolerance✓
- d.No tolerance
Transfer taxes are in the zero tolerance category, meaning the amount charged at closing generally cannot exceed the amount disclosed on the Loan Estimate. Transfer tax rates are set by law, so the creditor is expected to disclose them accurately.TRID
After the Closing Disclosure is issued, which change requires a new three-business-day waiting period before consummation?
- a.A change from a fixed-rate to an adjustable-rate loan✓
- b.A $50 decrease in the recording fee
- c.A $30 increase in a third-party fee
- d.A typo in the loan officer's phone number
Only three changes after the CD trigger a new three-business-day waiting period: the APR becomes inaccurate (increases beyond tolerance), the loan product changes, or a prepayment penalty is added. Switching from a fixed to an adjustable rate is a loan-product change, so a new waiting period is required.TRID
Which post-CD change does NOT trigger a new three-business-day waiting period?
- a.The loan product changes from fixed to adjustable
- b.A minor decrease in the seller's closing costs✓
- c.The APR increases above the applicable tolerance
- d.Adding a prepayment penalty
A minor decrease in the seller's closing costs does not affect the three triggers for a new waiting period. Only an inaccurate APR, a changed loan product, or the addition of a prepayment penalty requires the consumer to receive a corrected CD and wait three more business days.TRID
A new three-business-day waiting period after the Closing Disclosure is required in all of the following EXCEPT:
- a.A prepayment penalty is added
- b.The consumer's homeowners insurance premium decreases by $20✓
- c.The APR becomes inaccurate (increases beyond tolerance)
- d.The loan product changes
The three events that trigger a new three-business-day waiting period are an inaccurate APR, the addition of a prepayment penalty, and a change in the loan product. A small decrease in the homeowners insurance premium is not one of them, so no new waiting period is required.TRID
If the Closing Disclosure is placed in the mail, when is the consumer presumed to have received it (absent evidence of earlier receipt)?
- a.The day it is mailed
- b.Three business days after it is mailed✓
- c.Seven business days after mailing
- d.One business day after mailing
Under the mailbox rule, if the CD is mailed, the consumer is presumed to receive it three business days after it is placed in the mail, unless the creditor has evidence of earlier receipt. The three-business-day waiting period then runs from the presumed receipt date.TRID
Which of the following is disclosed on the Loan Estimate?
- a.The final, exact amount of cash to close guaranteed at closing
- b.The real estate agent's commission split
- c.The estimated interest rate, monthly payment, and total closing costs✓
- d.The seller's net proceeds
The Loan Estimate discloses key estimated loan terms, including the interest rate, monthly principal and interest payment, and total estimated closing costs. It is an estimate designed to help the consumer understand and compare offers, not a final, guaranteed figure.TRID
The primary purpose of the Loan Estimate is to:
- a.Help the consumer understand the key loan terms and costs and shop among lenders✓
- b.Guarantee the interest rate for 30 days
- c.Serve as a binding loan contract
- d.Replace the promissory note
The Loan Estimate is designed to give consumers clear, comparable information about the key terms and costs of a mortgage so they can shop among lenders. It is not a contract, a rate guarantee, or a substitute for the note.TRID