Practice test PSI Questions and Answers
| Latest Version | 2025/2026 | Correct &
Verified
What is the purpose of the “HUD-1 Settlement Statement”?
✔✔The HUD-1 Settlement Statement is a document that outlines all of the costs associated with
a real estate transaction, including closing costs and fees.
What is the “principal balance” of a mortgage loan?
✔✔The principal balance is the amount of money remaining to be paid on the original loan,
excluding interest.
What is the difference between a "mortgage" and a "deed of trust"?
✔✔A mortgage is a loan secured by real estate, while a deed of trust involves a third-party
trustee who holds the title until the loan is paid off.
What does the term “earnest money deposit” refer to in a real estate transaction?
✔✔An earnest money deposit is a payment made by the buyer to demonstrate their commitment
to the transaction, which is held in escrow until closing.
1
,What is a "leasehold estate"?
✔✔A leasehold estate is an interest in real property where the tenant has the right to use and
occupy the property for a specified period, but does not own it.
What does the term “real property” mean?
✔✔Real property refers to land and anything permanently attached to it, such as buildings, trees,
or improvements.
What is a “commission” in real estate?
✔✔A commission is the fee paid to a real estate agent or broker for their services, typically a
percentage of the property’s sale price.
What is the role of a “property manager” in real estate?
✔✔A property manager oversees the day-to-day operations of rental properties, handling
everything from leasing and maintenance to tenant relations.
What is “title defect”?
✔✔A title defect is any issue with the title of a property that can affect its transfer or ownership,
such as liens or ownership disputes.
2
,What is the purpose of a “real estate syndicate”?
✔✔A real estate syndicate is a group of investors who pool their money together to purchase and
manage a property or group of properties.
What does the term “adjustable-rate mortgage” (ARM) mean?
✔✔An adjustable-rate mortgage (ARM) is a loan where the interest rate changes periodically
based on a specific index or market conditions.
What is a “property disclosure statement”?
✔✔A property disclosure statement is a document provided by the seller that outlines known
issues or defects with the property.
What does the term "market value" refer to in real estate?
✔✔Market value refers to the price at which a property would sell in an open market under
normal conditions.
What is the role of a real estate agent during the selling process?
3
, ✔✔A real estate agent represents the seller and helps market the property, negotiate offers, and
guide the process to closing.
What is the definition of a “broke commission” in real estate?
✔✔A broker's commission is a fee paid to the real estate broker for facilitating the sale of a
property, typically calculated as a percentage of the sale price.
What does “principal” mean in a mortgage loan?
✔✔Principal is the amount of money borrowed to purchase the property, excluding interest.
What is the primary purpose of title insurance in a real estate transaction?
✔✔Title insurance protects the buyer and lender from any financial losses due to issues with the
title, such as disputes or unpaid property taxes.
What is an escrow account?
✔✔An escrow account is a third-party account where funds or documents are held until all
conditions of a transaction are met.
What does the term “closing costs” refer to?
4
| Latest Version | 2025/2026 | Correct &
Verified
What is the purpose of the “HUD-1 Settlement Statement”?
✔✔The HUD-1 Settlement Statement is a document that outlines all of the costs associated with
a real estate transaction, including closing costs and fees.
What is the “principal balance” of a mortgage loan?
✔✔The principal balance is the amount of money remaining to be paid on the original loan,
excluding interest.
What is the difference between a "mortgage" and a "deed of trust"?
✔✔A mortgage is a loan secured by real estate, while a deed of trust involves a third-party
trustee who holds the title until the loan is paid off.
What does the term “earnest money deposit” refer to in a real estate transaction?
✔✔An earnest money deposit is a payment made by the buyer to demonstrate their commitment
to the transaction, which is held in escrow until closing.
1
,What is a "leasehold estate"?
✔✔A leasehold estate is an interest in real property where the tenant has the right to use and
occupy the property for a specified period, but does not own it.
What does the term “real property” mean?
✔✔Real property refers to land and anything permanently attached to it, such as buildings, trees,
or improvements.
What is a “commission” in real estate?
✔✔A commission is the fee paid to a real estate agent or broker for their services, typically a
percentage of the property’s sale price.
What is the role of a “property manager” in real estate?
✔✔A property manager oversees the day-to-day operations of rental properties, handling
everything from leasing and maintenance to tenant relations.
What is “title defect”?
✔✔A title defect is any issue with the title of a property that can affect its transfer or ownership,
such as liens or ownership disputes.
2
,What is the purpose of a “real estate syndicate”?
✔✔A real estate syndicate is a group of investors who pool their money together to purchase and
manage a property or group of properties.
What does the term “adjustable-rate mortgage” (ARM) mean?
✔✔An adjustable-rate mortgage (ARM) is a loan where the interest rate changes periodically
based on a specific index or market conditions.
What is a “property disclosure statement”?
✔✔A property disclosure statement is a document provided by the seller that outlines known
issues or defects with the property.
What does the term "market value" refer to in real estate?
✔✔Market value refers to the price at which a property would sell in an open market under
normal conditions.
What is the role of a real estate agent during the selling process?
3
, ✔✔A real estate agent represents the seller and helps market the property, negotiate offers, and
guide the process to closing.
What is the definition of a “broke commission” in real estate?
✔✔A broker's commission is a fee paid to the real estate broker for facilitating the sale of a
property, typically calculated as a percentage of the sale price.
What does “principal” mean in a mortgage loan?
✔✔Principal is the amount of money borrowed to purchase the property, excluding interest.
What is the primary purpose of title insurance in a real estate transaction?
✔✔Title insurance protects the buyer and lender from any financial losses due to issues with the
title, such as disputes or unpaid property taxes.
What is an escrow account?
✔✔An escrow account is a third-party account where funds or documents are held until all
conditions of a transaction are met.
What does the term “closing costs” refer to?
4
