MLO SAFE EXAM 2024-2025 |ACTUAL COMPLETE
QUESTIONS AND CORRECT ANSWERS
Wraparound Mortgage - Correct answer-Results when an existing assumable loan is combined with a
new loan, resulting in an interest rate somewhere between the old rate and the current market rate.
Warranty Deed - Correct answer-A deed that contains a covenant that the grantor will protect the
grantee against any and all claims.
URAR - Correct answer-Uniform Residential Appraisal Report
Usury - Correct answer-Interest charged in excess of the legal rate established by law.
Shared Appreciation Mortgage (SAM) - Correct answer-A mortgage in which a borrower receives a
below-market interest rate in return for which the lender receives a portion of the future appreciation in
the value of the property.
Real Estate Settlement Procedures Act - Correct answer-Regulation X
,Truth-In-Lending Act - Correct answer-Regulation Z
Home Mortgage Disclosure Act - Correct answer-Regulation C
Equal Credit Opportunity Act - Correct answer-Regulation B
Mortgage Disclosure Improvement Act - Correct answer-Implemented through TILA section 35.
Two-Step Mortgage - Correct answer-A mortgage in which the borrower receives a below-market
interest rate for a specified number of years (7-10), and then receives a new interest rate adjusted to
market conditions at that time.
Tenancy by Severalty - Correct answer-Ownership of property by one person or one legal entity.
Who has the responsibility of qualifying a client for loan options?
Abstractor
Underwriter
MLO
Processor - Correct answer-MLO
A client is approved for a $210,000 loan amount and their purchase contract is listed for $230,000. What
is their down payment amount?
$20,000
$10,000
$30,000
$25,000 - Correct answer-$20,000
This document pledges the collateral as security for repayment of a debt
,Note
Title
Security Instrument
Purchase Contract - Correct answer-Security Instrument
This action solidifies the real estate transaction as being final and official.
Consummation
Recording
Funding
Closing - Correct answer-Recording
You are speaking with your client and they tell you they have been at their position for the past 4 years
and they receive $3,300 bi-weekly. Upon receiving their pay stubs, you realize that they earn $3,250 bi-
weekly. What is your client's qualifying gross monthly income?
$7,150
$7,041.67
$6,600
$6,800 - Correct answer-$7,041.67
Tenancy in Common - Correct answer-An ownership of real estate by two or more persons each of
whom has an undivided interest, without the right of survivorship.
Tenancy by the Entirety - Correct answer-An estate that exists only between husband and wife and
equal right of possession and enjoyment during their joint lives with the right of survivorship.
, Reverse Annuity Mortgage (RAM) - Correct answer-A form of mortgage in which the lender makes
periodic payments to the borrower using the borrower's equity in the home as collateral for and
repayment of the loan.
Points (loan discount points) - Correct answer-Prepaid interest assessed at closing by the lender. Each
point is equal to 1% of the loan amount.
Office of Thrift Supervision (OTS) - Correct answer-The regulatory and supervisory agency for federally
chartered savings institutions. Formally known as the Federal Home Loan Bank Board.
Non-Assumption Clause - Correct answer-A statement in a mortgage contract forbidding the assumption
of the mortgage without prior approval of the lender.
Margin - Correct answer-The amount a lender adds to the index on an adjustable rate mortgage to
establish the adjusted interest rate.
LTV - Correct answer-The relationship between the amount of the mortgage loan and the appraised
value of the property expressed as a %.
Jumbo Loan - Correct answer-A loan larger than the limits set by Fannie and Freddie.
Interim Loan - Correct answer-A construction loan made during completion of a building or a project.
Usually replaced by a permanent loan.
Interest Rate Buydown Plan - Correct answer-An arrangement that allows the property seller to deposit
money to an account. That money is then released each month to reduce the mortgagor's monthly
payments during the early years of a mortgage.
Indexed Rate - Correct answer-The sum of the published index plus the margin.
Impound/Reserves - Correct answer-The portion of a borrowers monthly payments held by the lender or
servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as
they become due.
QUESTIONS AND CORRECT ANSWERS
Wraparound Mortgage - Correct answer-Results when an existing assumable loan is combined with a
new loan, resulting in an interest rate somewhere between the old rate and the current market rate.
Warranty Deed - Correct answer-A deed that contains a covenant that the grantor will protect the
grantee against any and all claims.
URAR - Correct answer-Uniform Residential Appraisal Report
Usury - Correct answer-Interest charged in excess of the legal rate established by law.
Shared Appreciation Mortgage (SAM) - Correct answer-A mortgage in which a borrower receives a
below-market interest rate in return for which the lender receives a portion of the future appreciation in
the value of the property.
Real Estate Settlement Procedures Act - Correct answer-Regulation X
,Truth-In-Lending Act - Correct answer-Regulation Z
Home Mortgage Disclosure Act - Correct answer-Regulation C
Equal Credit Opportunity Act - Correct answer-Regulation B
Mortgage Disclosure Improvement Act - Correct answer-Implemented through TILA section 35.
Two-Step Mortgage - Correct answer-A mortgage in which the borrower receives a below-market
interest rate for a specified number of years (7-10), and then receives a new interest rate adjusted to
market conditions at that time.
Tenancy by Severalty - Correct answer-Ownership of property by one person or one legal entity.
Who has the responsibility of qualifying a client for loan options?
Abstractor
Underwriter
MLO
Processor - Correct answer-MLO
A client is approved for a $210,000 loan amount and their purchase contract is listed for $230,000. What
is their down payment amount?
$20,000
$10,000
$30,000
$25,000 - Correct answer-$20,000
This document pledges the collateral as security for repayment of a debt
,Note
Title
Security Instrument
Purchase Contract - Correct answer-Security Instrument
This action solidifies the real estate transaction as being final and official.
Consummation
Recording
Funding
Closing - Correct answer-Recording
You are speaking with your client and they tell you they have been at their position for the past 4 years
and they receive $3,300 bi-weekly. Upon receiving their pay stubs, you realize that they earn $3,250 bi-
weekly. What is your client's qualifying gross monthly income?
$7,150
$7,041.67
$6,600
$6,800 - Correct answer-$7,041.67
Tenancy in Common - Correct answer-An ownership of real estate by two or more persons each of
whom has an undivided interest, without the right of survivorship.
Tenancy by the Entirety - Correct answer-An estate that exists only between husband and wife and
equal right of possession and enjoyment during their joint lives with the right of survivorship.
, Reverse Annuity Mortgage (RAM) - Correct answer-A form of mortgage in which the lender makes
periodic payments to the borrower using the borrower's equity in the home as collateral for and
repayment of the loan.
Points (loan discount points) - Correct answer-Prepaid interest assessed at closing by the lender. Each
point is equal to 1% of the loan amount.
Office of Thrift Supervision (OTS) - Correct answer-The regulatory and supervisory agency for federally
chartered savings institutions. Formally known as the Federal Home Loan Bank Board.
Non-Assumption Clause - Correct answer-A statement in a mortgage contract forbidding the assumption
of the mortgage without prior approval of the lender.
Margin - Correct answer-The amount a lender adds to the index on an adjustable rate mortgage to
establish the adjusted interest rate.
LTV - Correct answer-The relationship between the amount of the mortgage loan and the appraised
value of the property expressed as a %.
Jumbo Loan - Correct answer-A loan larger than the limits set by Fannie and Freddie.
Interim Loan - Correct answer-A construction loan made during completion of a building or a project.
Usually replaced by a permanent loan.
Interest Rate Buydown Plan - Correct answer-An arrangement that allows the property seller to deposit
money to an account. That money is then released each month to reduce the mortgagor's monthly
payments during the early years of a mortgage.
Indexed Rate - Correct answer-The sum of the published index plus the margin.
Impound/Reserves - Correct answer-The portion of a borrowers monthly payments held by the lender or
servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as
they become due.
