SAFE Mortgage Loan Originator Exam Prep
UPDATED ACTUAL Exam Questions and
CORRECT Answers
15-year loan - CORRECT ANSWER - A nontraditional mortgage product that shortens the
standard mortgage term from 30 years to 15 years
2-1 buy-down - CORRECT ANSWER - A type of mortgage product with two set initial
interest rates that increase by steps until reaching the permanent rate; the rate is lowered by two
points in the first year and one point in the second year, then increases to the final and permanent
rate
Ability-to-Repay/Qualified Mortgage Rule - CORRECT ANSWER - Lenders must make a
reasonable and good faith effort to determine whether borrowers will be able to repay a mortgage
loan under the agreed-upon terms
accrued expense items - CORRECT ANSWER - Expenses that have been incurred but
aren't due yet (e.g., property taxes)
accrued interest - CORRECT ANSWER - The amount of interest incurred as of a specific
date on a loan; the amount of interest earned by the lender between payments of a loan
acquisition cost - CORRECT ANSWER - The total cost paid by the borrower to
completely purchase a property, including the loan amount, down payment, and closing costs
adjustable-rate mortgage (ARM) - CORRECT ANSWER - A nontraditional mortgage
product with a rate that changes, usually annually, based on the behavior of the economic index
with which it is associated (e.g., the Consumer Price Index)
adverse action - CORRECT ANSWER - A lender's decision to deny a loan application,
provide a borrower with an unfavorable change to an existing account, or terminate an account
,affiliated business arrangement - CORRECT ANSWER - Under RESPA, involves
referrals for closing services from one business entity to another that provides such services and
with which the referring entity has a relationship
alt-a loans - CORRECT ANSWER - A type of mortgage that has a risk profile that falls
between that of prime and subprime mortgage loans
American Association of Residential Mortgage Regulators (AARMR) - CORRECT
ANSWER - A national organization representing residential mortgage regulators and
promoting the exchange of information to administer and regulate residential mortgage lending,
servicing, and brokering
amortization - CORRECT ANSWER - The paying off of a debt with regular installments
over a fixed repayment schedule
annual percentage rate (APR) - CORRECT ANSWER - A rate derived according to a
government formula; intended to reflect the true cost of financing, and includes financing fees,
so it will always be higher than the actual interest rate on a loan
appraisal - CORRECT ANSWER - An estimate of value as of a specific date and for a
specific use
appraiser - CORRECT ANSWER - One who performs an appraisal for a fee
appraiser trainee - CORRECT ANSWER - Qualified to appraise properties but may only
do so under the supervision of a qualified certified appraiser
assessed value - CORRECT ANSWER - The dollar amount with which the local tax rate is
multiplied to determine property tax owed
,assigned loan - CORRECT ANSWER - A loan that has been sold on the secondary market
must be assigned to the new owner, and the assignment itself must be recorded at the local
registry; once the funds have been paid and the assignment is recorded, the loan is considered
assigned to the new owner
assumed business name - CORRECT ANSWER - Any name a business uses to operate
other than its legal name
average prime offer rate (APOR) - CORRECT ANSWER - According to Regulation Z, the
annual percentage rate is derived from average interest rates, points, and other loan pricing terms
offered to consumers by a representative sample of mortgage lenders for mortgage loan
transactions that have low risk pricing characteristics
bait-and-switch advertising - CORRECT ANSWER - Enticing consumers to respond to an
advertisement by including rates and terms that are too good to be true
balloon mortgage - CORRECT ANSWER - A nontraditional mortgage product that has
lower initial payments that do not amortize and require a "catch up" lump sum payment to be
paid at a specific time, usually at the end of a loan period
balloon payment - CORRECT ANSWER - A one-time payment, usually occurring at or
near the end of a loan term, that is larger than all the other payment amounts
Bank Secrecy Act (BSA) - CORRECT ANSWER - A federal law that requires financial
institutions to monitor transactions in order to spot and report suspicious activities
borrower - CORRECT ANSWER - A person who applies for a loan or other extension of
credit that will be secured wholly or in part by the interest in a dwelling or residential real estate
brokerage/finder's fee - CORRECT ANSWER - Any compensation or commission that is
directly or indirectly charged by a broker and paid by or on behalf of borrowers in order to obtain
a loan
, calendar year - CORRECT ANSWER - When prorating expenses for a real estate
transaction, this method uses the actual number of days in a year
cash out refinance - CORRECT ANSWER - A refinance of an existing mortgage loan with
a new loan that is larger than the existing loan; the borrower is turning some of the property's
equity into cash
certificate of eligibility (COE) - CORRECT ANSWER - A document issued by the U.S.
Department of Veterans Affairs that certifies a veteran's eligibility for a VA loan
certified general real estate appraiser - CORRECT ANSWER - An appraiser certified to
perform appraisals for any type and value of property for federally related real estate transactions
certified residential real estate appraiser - CORRECT ANSWER - An appraiser certified to
perform appraisals for one- to four-unit dwellings for federally related real estate transactions
changed circumstance - CORRECT ANSWER - For the purposes of a revised Loan
Estimate, changed circumstances are extraordinary events beyond the control of the parties or
new/changed information regarding the transaction or consumer
closing agent - CORRECT ANSWER - Manages the closing process, presents and
explains all of the closing documents to the parties, and obtains signatures; may be an attorney,
broker, or a title company representative
Closing Disclosure (CD) - CORRECT ANSWER - A statement of final loan terms and
closing costs that's provided to the borrower three days prior to closing; part of TRID lender
disclosure requirements
collateral assignment - CORRECT ANSWER - The borrower takes out a life insurance
policy that's used as collateral for the mortgage loan; the lender collects on the policy if the
borrower defaults or dies, and in exchange, the borrower qualifies for the loan
UPDATED ACTUAL Exam Questions and
CORRECT Answers
15-year loan - CORRECT ANSWER - A nontraditional mortgage product that shortens the
standard mortgage term from 30 years to 15 years
2-1 buy-down - CORRECT ANSWER - A type of mortgage product with two set initial
interest rates that increase by steps until reaching the permanent rate; the rate is lowered by two
points in the first year and one point in the second year, then increases to the final and permanent
rate
Ability-to-Repay/Qualified Mortgage Rule - CORRECT ANSWER - Lenders must make a
reasonable and good faith effort to determine whether borrowers will be able to repay a mortgage
loan under the agreed-upon terms
accrued expense items - CORRECT ANSWER - Expenses that have been incurred but
aren't due yet (e.g., property taxes)
accrued interest - CORRECT ANSWER - The amount of interest incurred as of a specific
date on a loan; the amount of interest earned by the lender between payments of a loan
acquisition cost - CORRECT ANSWER - The total cost paid by the borrower to
completely purchase a property, including the loan amount, down payment, and closing costs
adjustable-rate mortgage (ARM) - CORRECT ANSWER - A nontraditional mortgage
product with a rate that changes, usually annually, based on the behavior of the economic index
with which it is associated (e.g., the Consumer Price Index)
adverse action - CORRECT ANSWER - A lender's decision to deny a loan application,
provide a borrower with an unfavorable change to an existing account, or terminate an account
,affiliated business arrangement - CORRECT ANSWER - Under RESPA, involves
referrals for closing services from one business entity to another that provides such services and
with which the referring entity has a relationship
alt-a loans - CORRECT ANSWER - A type of mortgage that has a risk profile that falls
between that of prime and subprime mortgage loans
American Association of Residential Mortgage Regulators (AARMR) - CORRECT
ANSWER - A national organization representing residential mortgage regulators and
promoting the exchange of information to administer and regulate residential mortgage lending,
servicing, and brokering
amortization - CORRECT ANSWER - The paying off of a debt with regular installments
over a fixed repayment schedule
annual percentage rate (APR) - CORRECT ANSWER - A rate derived according to a
government formula; intended to reflect the true cost of financing, and includes financing fees,
so it will always be higher than the actual interest rate on a loan
appraisal - CORRECT ANSWER - An estimate of value as of a specific date and for a
specific use
appraiser - CORRECT ANSWER - One who performs an appraisal for a fee
appraiser trainee - CORRECT ANSWER - Qualified to appraise properties but may only
do so under the supervision of a qualified certified appraiser
assessed value - CORRECT ANSWER - The dollar amount with which the local tax rate is
multiplied to determine property tax owed
,assigned loan - CORRECT ANSWER - A loan that has been sold on the secondary market
must be assigned to the new owner, and the assignment itself must be recorded at the local
registry; once the funds have been paid and the assignment is recorded, the loan is considered
assigned to the new owner
assumed business name - CORRECT ANSWER - Any name a business uses to operate
other than its legal name
average prime offer rate (APOR) - CORRECT ANSWER - According to Regulation Z, the
annual percentage rate is derived from average interest rates, points, and other loan pricing terms
offered to consumers by a representative sample of mortgage lenders for mortgage loan
transactions that have low risk pricing characteristics
bait-and-switch advertising - CORRECT ANSWER - Enticing consumers to respond to an
advertisement by including rates and terms that are too good to be true
balloon mortgage - CORRECT ANSWER - A nontraditional mortgage product that has
lower initial payments that do not amortize and require a "catch up" lump sum payment to be
paid at a specific time, usually at the end of a loan period
balloon payment - CORRECT ANSWER - A one-time payment, usually occurring at or
near the end of a loan term, that is larger than all the other payment amounts
Bank Secrecy Act (BSA) - CORRECT ANSWER - A federal law that requires financial
institutions to monitor transactions in order to spot and report suspicious activities
borrower - CORRECT ANSWER - A person who applies for a loan or other extension of
credit that will be secured wholly or in part by the interest in a dwelling or residential real estate
brokerage/finder's fee - CORRECT ANSWER - Any compensation or commission that is
directly or indirectly charged by a broker and paid by or on behalf of borrowers in order to obtain
a loan
, calendar year - CORRECT ANSWER - When prorating expenses for a real estate
transaction, this method uses the actual number of days in a year
cash out refinance - CORRECT ANSWER - A refinance of an existing mortgage loan with
a new loan that is larger than the existing loan; the borrower is turning some of the property's
equity into cash
certificate of eligibility (COE) - CORRECT ANSWER - A document issued by the U.S.
Department of Veterans Affairs that certifies a veteran's eligibility for a VA loan
certified general real estate appraiser - CORRECT ANSWER - An appraiser certified to
perform appraisals for any type and value of property for federally related real estate transactions
certified residential real estate appraiser - CORRECT ANSWER - An appraiser certified to
perform appraisals for one- to four-unit dwellings for federally related real estate transactions
changed circumstance - CORRECT ANSWER - For the purposes of a revised Loan
Estimate, changed circumstances are extraordinary events beyond the control of the parties or
new/changed information regarding the transaction or consumer
closing agent - CORRECT ANSWER - Manages the closing process, presents and
explains all of the closing documents to the parties, and obtains signatures; may be an attorney,
broker, or a title company representative
Closing Disclosure (CD) - CORRECT ANSWER - A statement of final loan terms and
closing costs that's provided to the borrower three days prior to closing; part of TRID lender
disclosure requirements
collateral assignment - CORRECT ANSWER - The borrower takes out a life insurance
policy that's used as collateral for the mortgage loan; the lender collects on the policy if the
borrower defaults or dies, and in exchange, the borrower qualifies for the loan
