Official Sample Questions

Official sample questions provided by the CSBS

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1. If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant’s monthly income?

A $2,379.52
B $2,163.20
C $2,487.68
D $2,343.47

40 hours per week x $13.52 per hour = $540.80 (weekly income); $540.80 x 52 weeks per year = $28,121.60 (yearly income); $28,121.60 / 12 months = $2343.47 (monthly income)

2. According to the Equal Credit Opportunity Act (ECOA), age discrimination by a mortgage lender is acceptable:

A only if the applicant is too young or too old to understand the ramifications of defaulting on a legal debt.
B not under any circumstance.
C only if the applicant is too young to enter into a legally binding contract.
D only if life expectancy data indicates an applicant will not be alive at the end of the loan term.

ECOA prohibits age discrimination except in limited situations: - The main exception is when the person is not legally able to contract, usually under 18. - Life expectancy or capacity to understand a contract are NOT valid reasons to deny credit.

3. According to the Truth-in-Lending Act (TILA), the term “refinance” applies to:

A a change in a payment schedule.
B the renewal of a single payment obligation with no change in the original terms.
C a reduction in APR.
D the satisfaction of an existing obligation and its replacement by a new obligation.

TILA defines refinance as a new transaction that replaces and satisfies an existing loan obligation, even if it's with the same lender. It's more than just changing the terms — it's the creation of a new note.

4. According to the Truth-in-Lending Act (TILA), which of the following fees is excluded from the calculation of the APR?

A Prepaid interest
B Mortgage insurance premiums
C Hazard insurance
D Wire transfer

APR includes most fees required to obtain the loan — but hazard (homeowners) insurance is excluded because it's not considered a finance charge under TILA. It protects the property, not the credit transaction. Included in APR: * Prepaid interest * Mortgage insurance * Origination fees * Discount points

5. Which of the following documents does a mortgage loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales?

A An area survey
B A cost-benefit analysis
C A market survey
D An appraisal

An appraisal is the formal document where a licensed appraiser analyzes recent sales of comparable properties, property conditions, location, and market trends to determine a property’s value.

6. A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000 in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the down payment at closing?

A $30,000
B $32,000
C $25,000
D $27,000

$160,000 (sale price) x .20 (down payment percentage) = $32,000; $32,000 - [$5,000 (earnest money) + $2,000 (option money)] = $25,000

7. When a client’s property is being appraised, a loan underwriter may take all of the following actions except:

A ask the appraiser to consider additional property information.
B request a second review of the appraisal.
C ask the appraiser to correct an incidental error on the appraisal.
D inform the appraiser that the appraised value is contingent on the client’s retention of the principal dwelling.

TILA and Dodd-Frank prohibit coercion or influence over appraisers. Telling an appraiser to adjust the value based on unrelated factors, like whether a borrower will keep living there, violates appraiser independence. Permissible underwriter actions include: - Requesting a review - Asking for factual corrections - Providing additional property info

8. The requirement for private mortgage insurance (PMI) is generally discontinued when the loan-to- value ratio falls below:

A 80%
B 90%
C 50%
D 20%

PMI is typically required when the LTV exceeds 80%. Once the LTV drops to 80% or lower, PMI can be requested to be canceled. Lenders must automatically cancel it at 78% LTV, assuming timely payments.

9. The unique identifier of any person originating residential loan must be clearly shown on all of the following documents except:

A business cards.
B Consumer Financial Protection Bureau (CFPB) special information booklet.
C residential mortgage loan application form.
D company websites.

The NMLS unique identifier must appear on: Business cards Company websites Loan application forms However, it is not required on the CFPB special information booklet, which is a standard government document not individualized to the originator.

10. Included in the Loan Estimate, all of the following are part of the finance charge except the

A VA funding fee.
B appraisal cost.
C origination charges.
D per diem interest.

The finance charge includes all charges imposed directly or indirectly by the lender as a condition of the extension of credit. This generally includes: Per diem (prepaid) interest, Origination charges, Points, Mortgage insurance, etc. However, the appraisal fee is typically considered a third-party fee and not a finance charge, because it is for services rendered to determine the value of the property, not for obtaining credit.

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