Champions School of Real Estate – Finance Exam
2026 – Verified Actual Exam with Correct Solutions
1. A loan that has a fixed interest rate for an initial period, then adjusts periodically, is known
as a(n):
A. Fully Amortized Loan
B. Adjustable-Rate Mortgage (ARM) ✓
C. Reverse Mortgage
D. Package Mortgage
2. The clause in a mortgage or deed of trust that allows the lender to declare the entire loan
balance due if the borrower defaults is the:
A. Defeasance Clause
B. Alienation Clause
C. Acceleration Clause ✓
D. Habendum Clause
3. The primary function of the Federal Housing Administration (FHA) is to:
A. Lend money directly to homebuyers
B. Insure loans made by private lenders ✓
C. Regulate mortgage interest rates
D. Purchase mortgages on the secondary market
4. A buyer purchases a home for $350,000 with a 10% down payment. What is the amount of
the loan?
A. $35,000
B. $315,000 ✓
C. $350,000
D. $385,000
5. "PITI" stands for:
A. Principal, Interest, Taxes, Insurance ✓
B. Payment, Interest, Title, Insurance
C. Principal, Index, Taxes, Insurance
D. Payment, Index, Title, Insurance
6. The secondary mortgage market is primarily used to:
A. Provide funds for lenders to make new loans ✓
B. Provide loans to first-time homebuyers
,C. Set maximum interest rates for lenders
D. Insure conventional loans
7. Fannie Mae and Freddie Mac are examples of:
A. Primary Lenders
B. Government Insurers
C. Mortgage Bankers
D. Government-Sponsored Enterprises (GSEs) ✓
8. A loan-to-value ratio (LTV) is calculated as:
A. Sales Price ÷ Loan Amount
B. Loan Amount ÷ Sales Price ✓
C. Down Payment ÷ Loan Amount
D. Loan Amount ÷ Appraised Value
9. A borrower's housing expense ratio should generally not exceed what percentage of their
gross monthly income?
A. 28% ✓
B. 36%
C. 43%
D. 50%
10. The document that pledges the property as collateral for the loan without transferring
title is the:
A. Promissory Note
B. Deed
C. Mortgage or Deed of Trust ✓
D. Satisfaction of Mortgage
11. Discount points are used to:
A. Lower the borrower's down payment
B. Lower the borrower's interest rate ✓
C. Pay the real estate agent's commission
D. Increase the lender's yield without affecting the rate
12. One discount point is equal to:
A. 1% of the sale price
B. 1% of the loan amount ✓
C. 1% of the down payment
D. 1% of the appraised value
,13. A VA loan is unique because it:
A. Is for rural properties only
B. Always requires a 20% down payment
C. Is insured by the federal government
D. Is guaranteed by the federal government ✓
14. The "right of redemption" that gives a defaulted borrower the right to reclaim their
property after a foreclosure sale is known as:
A. Equitable Right of Redemption
B. Statutory Right of Redemption ✓
C. Judicial Redemption
D. Lien Theory Redemption
15. Regulation Z is associated with the:
A. Equal Credit Opportunity Act (ECOA)
B. Truth in Lending Act (TILA) ✓
C. Real Estate Settlement Procedures Act (RESPA)
D. Fair Housing Act
16. The Annual Percentage Rate (APR) is designed to represent the:
A. Simple interest rate on the loan
B. True, effective cost of credit, including fees and costs ✓
C. Maximum interest rate an ARM can reach
D. Rate after discount points are applied
17. A loan that is not backed by any government agency is called a(n):
A. FHA Loan
B. VA Loan
C. Conventional Loan ✓
D. Subprime Loan
18. In a deed of trust, the neutral third party who holds the naked title is the:
A. Trustor
B. Beneficiary
C. Trustee ✓
D. Vendee
19. The process of paying off a loan through regular payments of principal and interest is
called:
A. Acceleration
, B. Amortization ✓
C. Alienation
D. Appreciation
20. The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide borrowers
with all of the following EXCEPT:
A. A Good Faith Estimate (GFE)
B. A Loan Estimate ✓
C. A Special Information Booklet
D. A HUD-1 Settlement Statement
21. The "due-on-sale" clause is also known as the:
A. Acceleration Clause
B. Alienation Clause ✓
C. Defeasance Clause
D. Satisfaction Clause
22. Private Mortgage Insurance (PMI) is typically required on a conventional loan when the
LTV is greater than:
A. 70%
B. 80% ✓
C. 90%
D. 95%
23. The best description of a "bridge loan" is:
A. A long-term, fixed-rate mortgage
B. A loan used to purchase a new home before selling the old one ✓
C. A loan for repairing a property
D. A loan secured by a bridge
24. The primary purpose of an impound or escrow account is to:
A. Earn interest for the borrower
B. Pay the borrower's property taxes and insurance premiums ✓
C. Pay the lender's servicing fees
D. Hold the down payment funds
25. A mortgage that includes both real and personal property is called a:
A. Purchase Money Mortgage
B. Wrap-Around Mortgage
2026 – Verified Actual Exam with Correct Solutions
1. A loan that has a fixed interest rate for an initial period, then adjusts periodically, is known
as a(n):
A. Fully Amortized Loan
B. Adjustable-Rate Mortgage (ARM) ✓
C. Reverse Mortgage
D. Package Mortgage
2. The clause in a mortgage or deed of trust that allows the lender to declare the entire loan
balance due if the borrower defaults is the:
A. Defeasance Clause
B. Alienation Clause
C. Acceleration Clause ✓
D. Habendum Clause
3. The primary function of the Federal Housing Administration (FHA) is to:
A. Lend money directly to homebuyers
B. Insure loans made by private lenders ✓
C. Regulate mortgage interest rates
D. Purchase mortgages on the secondary market
4. A buyer purchases a home for $350,000 with a 10% down payment. What is the amount of
the loan?
A. $35,000
B. $315,000 ✓
C. $350,000
D. $385,000
5. "PITI" stands for:
A. Principal, Interest, Taxes, Insurance ✓
B. Payment, Interest, Title, Insurance
C. Principal, Index, Taxes, Insurance
D. Payment, Index, Title, Insurance
6. The secondary mortgage market is primarily used to:
A. Provide funds for lenders to make new loans ✓
B. Provide loans to first-time homebuyers
,C. Set maximum interest rates for lenders
D. Insure conventional loans
7. Fannie Mae and Freddie Mac are examples of:
A. Primary Lenders
B. Government Insurers
C. Mortgage Bankers
D. Government-Sponsored Enterprises (GSEs) ✓
8. A loan-to-value ratio (LTV) is calculated as:
A. Sales Price ÷ Loan Amount
B. Loan Amount ÷ Sales Price ✓
C. Down Payment ÷ Loan Amount
D. Loan Amount ÷ Appraised Value
9. A borrower's housing expense ratio should generally not exceed what percentage of their
gross monthly income?
A. 28% ✓
B. 36%
C. 43%
D. 50%
10. The document that pledges the property as collateral for the loan without transferring
title is the:
A. Promissory Note
B. Deed
C. Mortgage or Deed of Trust ✓
D. Satisfaction of Mortgage
11. Discount points are used to:
A. Lower the borrower's down payment
B. Lower the borrower's interest rate ✓
C. Pay the real estate agent's commission
D. Increase the lender's yield without affecting the rate
12. One discount point is equal to:
A. 1% of the sale price
B. 1% of the loan amount ✓
C. 1% of the down payment
D. 1% of the appraised value
,13. A VA loan is unique because it:
A. Is for rural properties only
B. Always requires a 20% down payment
C. Is insured by the federal government
D. Is guaranteed by the federal government ✓
14. The "right of redemption" that gives a defaulted borrower the right to reclaim their
property after a foreclosure sale is known as:
A. Equitable Right of Redemption
B. Statutory Right of Redemption ✓
C. Judicial Redemption
D. Lien Theory Redemption
15. Regulation Z is associated with the:
A. Equal Credit Opportunity Act (ECOA)
B. Truth in Lending Act (TILA) ✓
C. Real Estate Settlement Procedures Act (RESPA)
D. Fair Housing Act
16. The Annual Percentage Rate (APR) is designed to represent the:
A. Simple interest rate on the loan
B. True, effective cost of credit, including fees and costs ✓
C. Maximum interest rate an ARM can reach
D. Rate after discount points are applied
17. A loan that is not backed by any government agency is called a(n):
A. FHA Loan
B. VA Loan
C. Conventional Loan ✓
D. Subprime Loan
18. In a deed of trust, the neutral third party who holds the naked title is the:
A. Trustor
B. Beneficiary
C. Trustee ✓
D. Vendee
19. The process of paying off a loan through regular payments of principal and interest is
called:
A. Acceleration
, B. Amortization ✓
C. Alienation
D. Appreciation
20. The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide borrowers
with all of the following EXCEPT:
A. A Good Faith Estimate (GFE)
B. A Loan Estimate ✓
C. A Special Information Booklet
D. A HUD-1 Settlement Statement
21. The "due-on-sale" clause is also known as the:
A. Acceleration Clause
B. Alienation Clause ✓
C. Defeasance Clause
D. Satisfaction Clause
22. Private Mortgage Insurance (PMI) is typically required on a conventional loan when the
LTV is greater than:
A. 70%
B. 80% ✓
C. 90%
D. 95%
23. The best description of a "bridge loan" is:
A. A long-term, fixed-rate mortgage
B. A loan used to purchase a new home before selling the old one ✓
C. A loan for repairing a property
D. A loan secured by a bridge
24. The primary purpose of an impound or escrow account is to:
A. Earn interest for the borrower
B. Pay the borrower's property taxes and insurance premiums ✓
C. Pay the lender's servicing fees
D. Hold the down payment funds
25. A mortgage that includes both real and personal property is called a:
A. Purchase Money Mortgage
B. Wrap-Around Mortgage
