Practice Test Geeks(NMLS) National Mortgage Licensing System Practice Test
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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. What is 'prepaid interest' collected at closing?

    Answer: Interest covering the days from closing to the end of the month

    Prepaid interest covers the per diem interest from the closing date through the last day of that month.

  2. Under RESPA, what form provides a breakdown of all settlement charges at closing?

    Answer: Closing Disclosure

    The Closing Disclosure (replacing the HUD-1 under TRID) details all final closing costs and loan terms.

  3. A borrower's ARM has a margin of 2.5% and the current index value is 3.75%. What is the fully indexed rate?

    Answer: 6.25%

    Fully indexed rate = index (3.75%) + margin (2.50%) = 6.25%.

  4. What does the term 'points' mean in the context of mortgage financing?

    Answer: Each point equals 1% of the loan amount paid upfront

    A point is a fee equal to 1% of the loan amount, paid at closing to reduce the interest rate or cover lender costs.

  5. Which scenario best describes a 'rate-and-term refinance'?

    Answer: Refinancing only to get a lower rate or different term without cashing out

    A rate-and-term refinance changes the interest rate and/or loan term without extracting additional equity.

  6. A property appraises at $420,000 and the borrower wants a $350,000 loan. What is the LTV?

    Answer: 83.3%

    $350,000 / $420,000 ≈ 83.3% LTV.

  7. When a loan officer quotes a 'par rate,' what does this mean?

    Answer: The rate at which the lender breaks even with no points paid or received

    Par rate is the interest rate at which the lender neither charges discount points nor pays yield spread premium to the broker.