NMLS PRACTICE TEST EXAM QUESTIONS AND ANSWERS
(WELL DETAILED AND VERIFIED ANSWERS) LATEST
UPDATE 2024/2025
Which of the following may be a qualified mortgage?
A. A 30-year adjustable-rate mortgage loan granted to a borrower with a debt-to-
income ratio of 45%
B. A 40-year fixed-rate mortgage
C. A 35-year fixed-rate mortgage with points and fees equaling 3.75% of the loan
amount
D. A 20-year adjustable-rate mortgage granted to a borrower based on the
maximum interest rate that may apply during the first five years of the loan -
CORRECT ANSWER D
A lender may not charge for the preparation of any documents required in a
federally-regulated mortgage loan transaction, based on provisions of the:
A) Home Ownership and Equity Protection Act
B) Truth-in-Lending Act
C) Real Estate Settlement Procedures Act
D) Fair Lending Act - CORRECT ANSWER C
Which of the following circumstances is least likely to lead to a determination that
two entities are operating a sham affiliated business arrangement under RESPA?
A) Both entities share the same employees
B) One entity shares office space with the other entity
C) The same person owns both entities
,D) One entity's business comes exclusively from referrals from another entity -
CORRECT ANSWER C
A lender is prohibited from asking about income received from alimony by:
A) Privacy Laws
B) ECOA
C) Regulation Z
D) The GLB Act - CORRECT ANSWER B
Including misrepresentations regarding the amount of credit available to a
borrower in an advertisement is specifically prohibited by:
A) RESPA
B) The HMDA Rule
C) The MAP Rule
D) ECOA - CORRECT ANSWER C
Under the Financial Privacy Rule of the Gramm-Leach-Bliley Act, a customer of
Big Box Bank is entitled to a privacy notice:
A) Every six months
B) At any time the bank provides non-public personal information to a non-
affiliated third party
C) Annually
D) At the time he or she obtains a financial product from the bank and annually
thereafter - CORRECT ANSWER D
If a borrower's debt-to-income ratio is more than 43%:
,A) The loan is not eligible for sale on the secondary mortgage market
B) The loan may not be considered a qualified mortgage
C) The loan is a subprime loan
D) Mortgage insurance will be required - CORRECT ANSWER B
The borrower may not have a monthly debt-to-income ratio that exceeds 43%.
A homeowner has an FHA mortgage that is assumable. The homeowner would like
to sell his home and carry the contract - in other words, offer seller financing. The
homeowner's current FHA loan would not be paid off. Which of the following is
most true?
A) The homeowner can legally allow the buyer to assume the existing loan,
provided that the buyer is qualified
B) The homeowner is violating the assumability clause in their loan and risks
having the loan called due and payable
C) The homeowner is violating the due-on-sale clause and risks having the loan
called due and payable
D) Because the loan is FHA-insured and is assumable, the homeowner can offer
seller financing without paying off their current loan and without violating the
terms of their note and trust deed - CORRECT ANSWER A
FHA loans are assumable, meaning that if a borrower sells the home, the
homebuyer could potentially assume - i.e., take over - the existing FHA loan.
All of the following could be used to correctly describe Fannie Mae, except:
A) Government sponsored
B) Private sector
C) Government regulated
, D) Government owned - CORRECT ANSWER D
Fannie Mae is a government-sponsored enterprise, regulated by but not owned by
the federal government.
The Interagency Guidance on Nontraditional Mortgage Products applies to:
A) Any mortgage that requires a determination of ability to repay
B) Any adjustable-rate mortgage
C) Any mortgage with a prepayment penalty
D) Any mortgage which allows the deferment of principal or interest - CORRECT
ANSWER D
Under the Guidance, the term "nontraditional mortgage product" refers to a closed-
end residential mortgage loan product that allows a borrower to defer payment of
principal and sometimes interest.
According to the Statement on Subprime Mortgage Lending, which of the
following would be a characteristic of a subprime loan?
A) A credit score of 575
B) Low initial payments based on a fixed introductory rate that quickly expires,
after which the loan begins its adjustable-rate phase
C) Required third-party verified documentation of the applicant's income
D) Low refinance fees to encourage frequent refinancing to maintain an affordable
monthly payment - CORRECT ANSWER B
A subprime loan may have one or more of the following characteristics: low initial
payments based on a fixed introductory rate that quickly expires and adjusts to a
fully-indexed variable rate for the remaining loan term, very high or no limits on
the increase in payment or interest rate at periodic rate adjustments, limited or no
documentation of borrowers' income, features likely to result in frequent
(WELL DETAILED AND VERIFIED ANSWERS) LATEST
UPDATE 2024/2025
Which of the following may be a qualified mortgage?
A. A 30-year adjustable-rate mortgage loan granted to a borrower with a debt-to-
income ratio of 45%
B. A 40-year fixed-rate mortgage
C. A 35-year fixed-rate mortgage with points and fees equaling 3.75% of the loan
amount
D. A 20-year adjustable-rate mortgage granted to a borrower based on the
maximum interest rate that may apply during the first five years of the loan -
CORRECT ANSWER D
A lender may not charge for the preparation of any documents required in a
federally-regulated mortgage loan transaction, based on provisions of the:
A) Home Ownership and Equity Protection Act
B) Truth-in-Lending Act
C) Real Estate Settlement Procedures Act
D) Fair Lending Act - CORRECT ANSWER C
Which of the following circumstances is least likely to lead to a determination that
two entities are operating a sham affiliated business arrangement under RESPA?
A) Both entities share the same employees
B) One entity shares office space with the other entity
C) The same person owns both entities
,D) One entity's business comes exclusively from referrals from another entity -
CORRECT ANSWER C
A lender is prohibited from asking about income received from alimony by:
A) Privacy Laws
B) ECOA
C) Regulation Z
D) The GLB Act - CORRECT ANSWER B
Including misrepresentations regarding the amount of credit available to a
borrower in an advertisement is specifically prohibited by:
A) RESPA
B) The HMDA Rule
C) The MAP Rule
D) ECOA - CORRECT ANSWER C
Under the Financial Privacy Rule of the Gramm-Leach-Bliley Act, a customer of
Big Box Bank is entitled to a privacy notice:
A) Every six months
B) At any time the bank provides non-public personal information to a non-
affiliated third party
C) Annually
D) At the time he or she obtains a financial product from the bank and annually
thereafter - CORRECT ANSWER D
If a borrower's debt-to-income ratio is more than 43%:
,A) The loan is not eligible for sale on the secondary mortgage market
B) The loan may not be considered a qualified mortgage
C) The loan is a subprime loan
D) Mortgage insurance will be required - CORRECT ANSWER B
The borrower may not have a monthly debt-to-income ratio that exceeds 43%.
A homeowner has an FHA mortgage that is assumable. The homeowner would like
to sell his home and carry the contract - in other words, offer seller financing. The
homeowner's current FHA loan would not be paid off. Which of the following is
most true?
A) The homeowner can legally allow the buyer to assume the existing loan,
provided that the buyer is qualified
B) The homeowner is violating the assumability clause in their loan and risks
having the loan called due and payable
C) The homeowner is violating the due-on-sale clause and risks having the loan
called due and payable
D) Because the loan is FHA-insured and is assumable, the homeowner can offer
seller financing without paying off their current loan and without violating the
terms of their note and trust deed - CORRECT ANSWER A
FHA loans are assumable, meaning that if a borrower sells the home, the
homebuyer could potentially assume - i.e., take over - the existing FHA loan.
All of the following could be used to correctly describe Fannie Mae, except:
A) Government sponsored
B) Private sector
C) Government regulated
, D) Government owned - CORRECT ANSWER D
Fannie Mae is a government-sponsored enterprise, regulated by but not owned by
the federal government.
The Interagency Guidance on Nontraditional Mortgage Products applies to:
A) Any mortgage that requires a determination of ability to repay
B) Any adjustable-rate mortgage
C) Any mortgage with a prepayment penalty
D) Any mortgage which allows the deferment of principal or interest - CORRECT
ANSWER D
Under the Guidance, the term "nontraditional mortgage product" refers to a closed-
end residential mortgage loan product that allows a borrower to defer payment of
principal and sometimes interest.
According to the Statement on Subprime Mortgage Lending, which of the
following would be a characteristic of a subprime loan?
A) A credit score of 575
B) Low initial payments based on a fixed introductory rate that quickly expires,
after which the loan begins its adjustable-rate phase
C) Required third-party verified documentation of the applicant's income
D) Low refinance fees to encourage frequent refinancing to maintain an affordable
monthly payment - CORRECT ANSWER B
A subprime loan may have one or more of the following characteristics: low initial
payments based on a fixed introductory rate that quickly expires and adjusts to a
fully-indexed variable rate for the remaining loan term, very high or no limits on
the increase in payment or interest rate at periodic rate adjustments, limited or no
documentation of borrowers' income, features likely to result in frequent
