NMLS MLO EXAM COMPLETE QUESTIONS WITH
VERIFIED ANSWERS AND EXPLANATIONS
Question 1
A borrower has a credit score of 620 and is applying for a conventional loan.
Which of the following is TRUE regarding the loan’s eligibility?
A) The loan is automatically ineligible because the minimum score for
conventional loans is 660
B) The loan may be eligible but will likely require a higher down payment or higher
LLPA
C) FHA is the only option for scores below 640
D) The score is irrelevant if the DTI is below 36%
Correct Answer: B
*Rationale: While Fannie Mae/Freddie Mac conventional loans often target 620+
as minimum, lower scores (620-639) typically trigger Loan-Level Price Adjustments
(LLPAs) and may require 5-10% down. Option A is false (660 is not universal).
Option C is false (FHA is common but not exclusive). Option D is false (credit score
is highly relevant).*
Question 2
Under TILA, when must a creditor provide the initial Loan Estimate to a
consumer?
A) Within 3 business days after the consumer submits a complete application
B) At closing, at least 1 day before signing
C) Within 5 calendar days of receiving the property address
D) At the time of prequalification, even if no application is taken
,Correct Answer: A
Rationale: Regulation Z (TILA) requires the Loan Estimate to be delivered or placed
in the mail within 3 business days after receipt of a complete application (name,
income, SSN, property address, estimated value, loan amount).
Question 3
A borrower applies for a reverse mortgage. Which repayment event would NOT
trigger the loan becoming due and payable?
A) The borrower moves to a nursing home permanently
B) The borrower fails to pay property taxes for two consecutive years
C) The borrower dies
D) The borrower takes a vacation for 3 weeks
Correct Answer: D
*Rationale: Reverse mortgages (HECM) become due if borrower stops using the
home as primary residence for 12+ consecutive months, fails to pay
taxes/insurance, or dies. A 3-week vacation is not a trigger.*
Question 4
Which federal law requires a three-day right of rescission on refinances of owner-
occupied primary residences (but not purchases)?
A) RESPA
B) TILA
C) ECOA
D) SAFE Act
Correct Answer: B
*Rationale: TILA (Reg Z) §1026.23 gives a 3-business-day right of rescission on
refinances, home equity loans, and conversions from adjustable to fixed, but NOT
on purchase money mortgages.*
,Question 5
An MLO has a borrower who is 62, self-employed, and wants a 30-year fixed FHA
loan. The borrower provides two years of tax returns. What must the MLO
consider?
A) FHA requires a minimum credit score of 640 for all self-employed borrowers
B) The borrower’s qualifying income will be based on an average of the last two
years’ net income unless business is declining
C) Self-employed borrowers are ineligible for FHA loans over $200,000
D) Age 62 is too old for a 30-year term under FHA guidelines
Correct Answer: B
*Rationale: FHA requires lenders to average net income from self-employment
over the last two years if stable or increasing; if declining, use the lower year. No
age limit for FHA; scores: 580 for 3.5% down, 500-579 for 10% down.*
Question 6
Under the SAFE Act, a loan originator must:
A) Register with the NMLS and obtain a unique identifier
B) Pass only a state exam, no federal exam required
C) Be employed by a federally chartered bank to avoid state licensing
D) Renew the license every 5 years without continuing education
Correct Answer: A
*Rationale: SAFE Act requires MLOs to be licensed/registered through NMLS, get a
unique ID, pass both federal and state components (if applicable), and complete 8
hours of CE annually.*
Question 7
Which of the following is NOT a triggering term under TILA’s advertising rules?
A) “No closing costs”
B) “5% down payment”
, C) “We have low rates”
D) “Monthly payments of $1,200”
Correct Answer: C
Rationale: Triggering terms (Reg Z, §1026.24) include down payment amount,
payment amount, finance charge, number of payments, “no closing costs,” etc.
“Low rates” is vague and not a triggering term.
Question 8
A borrower’s income is $6,000/month. Monthly debts: car $400, student loan
$300 (minimum payment), credit card $200, proposed new PITI $2,200. What is
the front-end (housing) ratio?
A) 36.7%
B) 31.4%
C) 45.0%
D) 51.6%
Correct Answer: A
*Rationale: Front-end ratio = housing expense / gross monthly income = $2,200 /
$6,000 = 0.3667 → 36.7%. Back-end would include all debts.*
Question 9
Which law prohibits redlining based on the racial composition of a neighborhood?
A) HMDA
B) Fair Housing Act
C) Real Estate Settlement Procedures Act (RESPA)
D) Truth in Lending Act (TILA)
Correct Answer: B
Rationale: Fair Housing Act (Title VIII) makes it unlawful to discriminate in lending
based on race, color, religion, sex, disability, familial status, or national origin,
including redlining (refusing loans in minority areas). HMDA collects data to detect
redlining but does not prohibit it directly.
VERIFIED ANSWERS AND EXPLANATIONS
Question 1
A borrower has a credit score of 620 and is applying for a conventional loan.
Which of the following is TRUE regarding the loan’s eligibility?
A) The loan is automatically ineligible because the minimum score for
conventional loans is 660
B) The loan may be eligible but will likely require a higher down payment or higher
LLPA
C) FHA is the only option for scores below 640
D) The score is irrelevant if the DTI is below 36%
Correct Answer: B
*Rationale: While Fannie Mae/Freddie Mac conventional loans often target 620+
as minimum, lower scores (620-639) typically trigger Loan-Level Price Adjustments
(LLPAs) and may require 5-10% down. Option A is false (660 is not universal).
Option C is false (FHA is common but not exclusive). Option D is false (credit score
is highly relevant).*
Question 2
Under TILA, when must a creditor provide the initial Loan Estimate to a
consumer?
A) Within 3 business days after the consumer submits a complete application
B) At closing, at least 1 day before signing
C) Within 5 calendar days of receiving the property address
D) At the time of prequalification, even if no application is taken
,Correct Answer: A
Rationale: Regulation Z (TILA) requires the Loan Estimate to be delivered or placed
in the mail within 3 business days after receipt of a complete application (name,
income, SSN, property address, estimated value, loan amount).
Question 3
A borrower applies for a reverse mortgage. Which repayment event would NOT
trigger the loan becoming due and payable?
A) The borrower moves to a nursing home permanently
B) The borrower fails to pay property taxes for two consecutive years
C) The borrower dies
D) The borrower takes a vacation for 3 weeks
Correct Answer: D
*Rationale: Reverse mortgages (HECM) become due if borrower stops using the
home as primary residence for 12+ consecutive months, fails to pay
taxes/insurance, or dies. A 3-week vacation is not a trigger.*
Question 4
Which federal law requires a three-day right of rescission on refinances of owner-
occupied primary residences (but not purchases)?
A) RESPA
B) TILA
C) ECOA
D) SAFE Act
Correct Answer: B
*Rationale: TILA (Reg Z) §1026.23 gives a 3-business-day right of rescission on
refinances, home equity loans, and conversions from adjustable to fixed, but NOT
on purchase money mortgages.*
,Question 5
An MLO has a borrower who is 62, self-employed, and wants a 30-year fixed FHA
loan. The borrower provides two years of tax returns. What must the MLO
consider?
A) FHA requires a minimum credit score of 640 for all self-employed borrowers
B) The borrower’s qualifying income will be based on an average of the last two
years’ net income unless business is declining
C) Self-employed borrowers are ineligible for FHA loans over $200,000
D) Age 62 is too old for a 30-year term under FHA guidelines
Correct Answer: B
*Rationale: FHA requires lenders to average net income from self-employment
over the last two years if stable or increasing; if declining, use the lower year. No
age limit for FHA; scores: 580 for 3.5% down, 500-579 for 10% down.*
Question 6
Under the SAFE Act, a loan originator must:
A) Register with the NMLS and obtain a unique identifier
B) Pass only a state exam, no federal exam required
C) Be employed by a federally chartered bank to avoid state licensing
D) Renew the license every 5 years without continuing education
Correct Answer: A
*Rationale: SAFE Act requires MLOs to be licensed/registered through NMLS, get a
unique ID, pass both federal and state components (if applicable), and complete 8
hours of CE annually.*
Question 7
Which of the following is NOT a triggering term under TILA’s advertising rules?
A) “No closing costs”
B) “5% down payment”
, C) “We have low rates”
D) “Monthly payments of $1,200”
Correct Answer: C
Rationale: Triggering terms (Reg Z, §1026.24) include down payment amount,
payment amount, finance charge, number of payments, “no closing costs,” etc.
“Low rates” is vague and not a triggering term.
Question 8
A borrower’s income is $6,000/month. Monthly debts: car $400, student loan
$300 (minimum payment), credit card $200, proposed new PITI $2,200. What is
the front-end (housing) ratio?
A) 36.7%
B) 31.4%
C) 45.0%
D) 51.6%
Correct Answer: A
*Rationale: Front-end ratio = housing expense / gross monthly income = $2,200 /
$6,000 = 0.3667 → 36.7%. Back-end would include all debts.*
Question 9
Which law prohibits redlining based on the racial composition of a neighborhood?
A) HMDA
B) Fair Housing Act
C) Real Estate Settlement Procedures Act (RESPA)
D) Truth in Lending Act (TILA)
Correct Answer: B
Rationale: Fair Housing Act (Title VIII) makes it unlawful to discriminate in lending
based on race, color, religion, sex, disability, familial status, or national origin,
including redlining (refusing loans in minority areas). HMDA collects data to detect
redlining but does not prohibit it directly.
