CALIFORNIA REAL ESTATE BROKER EXAM2026|||quESTIONS ANd
ANSwERS wITh RATIONALES/gRAdEd A+/2026 updATE/100%
CORRECT /INSTANT dOwNLOAd
Section 1: Real Estate Finance and Mortgage Lending Questions 1 to 30
**Question 1**
A type of mortgage loan where the interest rate can change periodically based on a specified
financial index is called a(n):
A. Fixed-rate mortgage
B. Adjustable-rate mortgage (ARM)
C. Reverse mortgage
D. Balloon mortgage
**Correct Answer: B**
Rationale: An adjustable-rate mortgage (ARM) has an interest rate that adjusts periodically
based on an index (e.g., COFI, SOFR, Treasury index). Fixed-rate mortgages (A) have constant
rates. Reverse mortgages (C) are for seniors to convert home equity to cash. Balloon mortgages
(D) require a large final payment.
---
**Question 2**
The Truth in Lending Act (TILA) requires lenders to disclose which of the following to
borrowers?
A. The property's appraised value
B. The annual percentage rate (APR) and total finance charges
C. The seller's original purchase price
,D. The broker's commission amount
**Correct Answer: B**
Rationale: TILA (Regulation Z) requires lenders to disclose the APR, finance charges, total
payments, and other loan terms so borrowers can compare loan costs. Appraised value (A),
seller's original price (C), and broker commission (D) are not required by TILA.
---
**Question 3**
Which of the following best describes a "hard money loan"?
A. A government-backed loan with low interest rates
B. A short-term, high-interest loan based primarily on property value rather than borrower credit
C. A loan with no down payment requirement
D. A loan that is assumable by any buyer
**Correct Answer: B**
Rationale: Hard money loans are short-term, asset-based loans from private investors. Approval
is based primarily on the property's value and equity, not the borrower's credit. They have
higher interest rates and fees. Government-backed loans (A) are not hard money.
---
**Question 4**
In California, a "promissory note" is best described as:
A. A document that transfers title to the property
B. A written promise to repay a debt at specified terms
C. A document that records the mortgage with the county
D. A notice of default to the borrower
, **Correct Answer: B**
Rationale: A promissory note is a written promise from the borrower to repay a debt, specifying
the principal amount, interest rate, payment schedule, and maturity date. It is the evidence of
the debt. The deed of trust (A) secures the note. Recording (C) is done with the deed of trust.
---
**Question 5**
A borrower defaults on a loan secured by a deed of trust in California. The lender initiates a non-
judicial foreclosure. The period of time after the notice of default is filed during which the
borrower can reinstate the loan is called the:
A. Redemption period
B. Reinstatement period
C. Notice of sale period
D. Due-on-sale period
**Correct Answer: B**
Rationale: The reinstatement period is the time after the notice of default is filed but before the
notice of sale (typically 3 months). The borrower can pay overdue amounts plus fees to reinstate
the loan. Redemption period (A) applies after foreclosure in some states but is limited in
California.
---
**Question 6**
The Real Estate Settlement Procedures Act (RESPA) applies to:
A. All commercial real estate transactions
B. Federally related mortgage loans on 1-to-4 family residential properties
C. All cash transactions
ANSwERS wITh RATIONALES/gRAdEd A+/2026 updATE/100%
CORRECT /INSTANT dOwNLOAd
Section 1: Real Estate Finance and Mortgage Lending Questions 1 to 30
**Question 1**
A type of mortgage loan where the interest rate can change periodically based on a specified
financial index is called a(n):
A. Fixed-rate mortgage
B. Adjustable-rate mortgage (ARM)
C. Reverse mortgage
D. Balloon mortgage
**Correct Answer: B**
Rationale: An adjustable-rate mortgage (ARM) has an interest rate that adjusts periodically
based on an index (e.g., COFI, SOFR, Treasury index). Fixed-rate mortgages (A) have constant
rates. Reverse mortgages (C) are for seniors to convert home equity to cash. Balloon mortgages
(D) require a large final payment.
---
**Question 2**
The Truth in Lending Act (TILA) requires lenders to disclose which of the following to
borrowers?
A. The property's appraised value
B. The annual percentage rate (APR) and total finance charges
C. The seller's original purchase price
,D. The broker's commission amount
**Correct Answer: B**
Rationale: TILA (Regulation Z) requires lenders to disclose the APR, finance charges, total
payments, and other loan terms so borrowers can compare loan costs. Appraised value (A),
seller's original price (C), and broker commission (D) are not required by TILA.
---
**Question 3**
Which of the following best describes a "hard money loan"?
A. A government-backed loan with low interest rates
B. A short-term, high-interest loan based primarily on property value rather than borrower credit
C. A loan with no down payment requirement
D. A loan that is assumable by any buyer
**Correct Answer: B**
Rationale: Hard money loans are short-term, asset-based loans from private investors. Approval
is based primarily on the property's value and equity, not the borrower's credit. They have
higher interest rates and fees. Government-backed loans (A) are not hard money.
---
**Question 4**
In California, a "promissory note" is best described as:
A. A document that transfers title to the property
B. A written promise to repay a debt at specified terms
C. A document that records the mortgage with the county
D. A notice of default to the borrower
, **Correct Answer: B**
Rationale: A promissory note is a written promise from the borrower to repay a debt, specifying
the principal amount, interest rate, payment schedule, and maturity date. It is the evidence of
the debt. The deed of trust (A) secures the note. Recording (C) is done with the deed of trust.
---
**Question 5**
A borrower defaults on a loan secured by a deed of trust in California. The lender initiates a non-
judicial foreclosure. The period of time after the notice of default is filed during which the
borrower can reinstate the loan is called the:
A. Redemption period
B. Reinstatement period
C. Notice of sale period
D. Due-on-sale period
**Correct Answer: B**
Rationale: The reinstatement period is the time after the notice of default is filed but before the
notice of sale (typically 3 months). The borrower can pay overdue amounts plus fees to reinstate
the loan. Redemption period (A) applies after foreclosure in some states but is limited in
California.
---
**Question 6**
The Real Estate Settlement Procedures Act (RESPA) applies to:
A. All commercial real estate transactions
B. Federally related mortgage loans on 1-to-4 family residential properties
C. All cash transactions
