Practice Test Geeks(NMLS) National Mortgage Licensing System Practice Test
← All NMLS Flashcard Decks

Mortgage Finance and Calculations Flashcards

7 cards from real NMLS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Mortgage Finance and Calculations flashcards as text

  1. A borrower refinances a $180,000 mortgage and pays $4,500 in closing costs. What is the break-even period if the new payment saves $150/month?

    Answer: 30 months

    $4,500 ÷ $150/month = 30 months to recoup closing costs.

  2. What type of index is commonly used for adjustable-rate mortgages in the United States?

    Answer: LIBOR (now SOFR)

    SOFR has replaced LIBOR as the most common ARM index; LIBOR was the legacy standard.

  3. If a borrower's total monthly debt payments are $2,400 and gross monthly income is $8,000, what is the back-end DTI?

    Answer: 30%

    $2,400 / $8,000 = 0.30 = 30% back-end DTI.

  4. Which formula correctly calculates the Loan-to-Value (LTV) ratio?

    Answer: Loan Amount / Purchase Price × 100

    LTV = Loan Amount ÷ (lower of appraised value or purchase price) × 100.

  5. A borrower makes a 10% down payment on a $350,000 home. What is the minimum additional monthly cost likely required by the lender?

    Answer: Private Mortgage Insurance (PMI)

    When LTV exceeds 80% (10% down = 90% LTV), conventional loans typically require PMI.

  6. What is the purpose of an escrow account in a mortgage?

    Answer: To collect monthly amounts for taxes and insurance so the lender can pay them

    Escrow accounts accumulate monthly contributions so the lender can pay property taxes and insurance premiums on behalf of the borrower.

  7. A lender charges a 1% origination fee on a $320,000 loan. What is the dollar amount of the fee?

    Answer: $3,200

    1% × $320,000 = $3,200.