NMLS MLO Exam preparation set with 140+
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Question 1
A loan originator is advising a borrower on a cash-out refinance for a primary residence. The borrower
wants to use the funds to pay off credit card debt and make home improvements. Under federal law,
which of the following is a requirement?
A) The loan must have a fixed interest rate for at least 5 years.
B) The total points and fees cannot exceed 5% of the loan amount if the loan is a higher-priced mortgage
loan.
C) The borrower must receive a written appraisal, but only if the loan amount exceeds $250,000.
D) The loan originator must recommend that the borrower keep at least 20% equity after the refinance.
Correct Answer: B
Rationale:
A – Incorrect. Federal law does not require a 5-year fixed period for cash-out refinances; that applies to
certain qualified mortgages.
B – Correct. Under the Truth in Lending Act (TILA) and Dodd-Frank, a higher-priced mortgage loan
(HPML) with points and fees exceeding 5% of the total loan amount is presumptively non-qualified and
may be prohibited.
C – Incorrect. Appraisals are required for most refinances regardless of loan amount under TILA’s
appraisal rule, with limited exceptions.
D – Incorrect. While LTV matters for pricing, there is no federal requirement to recommend 20% equity
retention.
Question 2
,Under the SAFE Act, which of the following actions requires a mortgage loan originator to be licensed?
A) Preparing loan application forms using software but not discussing terms with the borrower.
B) Presenting a loan offer to a borrower for a residential mortgage loan for compensation.
C) Typing data into a loan origination system at the direction of a licensed MLO.
D) Answering general questions about current mortgage rates on a public website.
Correct Answer: B
Rationale:
A – Incorrect. Data entry without borrower interaction or negotiation does not meet the definition of
“loan originator activities.”
B – Correct. Presenting a loan offer for compensation to a borrower meets the SAFE Act definition of
originating a mortgage loan.
C – Incorrect. Clerical or data entry tasks not involving independent judgment or borrower contact are
exempt.
D – Incorrect. Providing general rate information without individualized analysis is not loan origination.
Question 3
A borrower applies for an FHA loan. The borrower has a credit score of 580 and a 3.5% down payment.
Which of the following is true regarding FHA’s requirements?
A) The borrower must have a minimum 620 credit score for any down payment less than 5%.
B) The borrower is eligible for a 3.5% down payment with a 580 credit score.
C) The borrower must have a 640 credit score if the DTI exceeds 43%.
D) The borrower’s credit score must be at least 600 to qualify for FHA insurance.
Correct Answer: B
Rationale:
A – Incorrect. FHA’s minimum credit score for maximum financing (96.5% LTV) is 580.
B – Correct. FHA allows 3.5% down for credit scores 580 and above; below 580 requires 10% down.
C – Incorrect. DTI over 43% may be allowed with compensating factors; no 640 minimum exists.
D – Incorrect. 500 is the minimum for 90% LTV; 580 for 96.5% LTV.
,Question 4
Which federal law requires lenders to provide a Loan Estimate within three business days of receiving a
mortgage application?
A) Real Estate Settlement Procedures Act (RESPA)
B) Truth in Lending Act (TILA) only
C) TILA-RESPA Integrated Disclosure (TRID) rule
D) Equal Credit Opportunity Act (ECOA)
Correct Answer: C
Rationale:
A – Incorrect. RESPA originally required Good Faith Estimate, but TRID replaced GFE and TIL disclosure
with Loan Estimate.
B – Incorrect. TILA alone did not mandate the three-day Loan Estimate; TRID combines both laws.
C – Correct. TRID (Regulation Z) requires Loan Estimate within 3 business days of application.
D – Incorrect. ECOA prohibits discrimination but does not set disclosure timing.
Question 5
A loan originator learns that a borrower has filed for Chapter 13 bankruptcy 18 months ago, which was
discharged 6 months ago. For a conventional loan backed by Fannie Mae, what is the waiting period
requirement?
A) 2 years from discharge date.
B) 4 years from discharge date.
C) 2 years from dismissal date.
D) No waiting period if borrower has reestablished credit.
Correct Answer: A
Rationale:
A – Correct. Fannie Mae requires 2 years from Chapter 13 discharge date for conventional loans.
B – Incorrect. 4 years applies to Chapter 7 bankruptcy.
, C – Incorrect. Dismissal is different from discharge; discharge is completion.
D – Incorrect. A waiting period is required regardless of credit reestablishment.
Question 6
Under the Fair Housing Act, which of the following is prohibited?
A) Refusing to make a loan because the property is located in a flood zone.
B) Steering a Hispanic borrower to a neighborhood with a high concentration of Hispanic residents.
C) Charging a higher interest rate based on the borrower’s credit score.
D) Requiring a larger down payment for a self-employed borrower.
Correct Answer: B
Rationale:
A – Incorrect. Flood zone is not a protected class; lenders may decline due to flood insurance
requirements.
B – Correct. Steering based on race or national origin is illegal under the Fair Housing Act.
C – Incorrect. Credit score is a permissible risk-based pricing factor.
D – Incorrect. Self-employment is not a protected class; higher down payment may be justified.
Question 7
A borrower receives a Closing Disclosure. How many business days before consummation must the
borrower receive this disclosure?
A) At least 1 business day.
B) At least 3 business days.
C) At least 7 business days.
D) No set time if waived in writing.
Correct Answer: B
Rationale:
A – Incorrect. One day is insufficient under TRID.
questions Exam Questions with Correct
Answers Latest Update 2026 Guaranteed
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Question 1
A loan originator is advising a borrower on a cash-out refinance for a primary residence. The borrower
wants to use the funds to pay off credit card debt and make home improvements. Under federal law,
which of the following is a requirement?
A) The loan must have a fixed interest rate for at least 5 years.
B) The total points and fees cannot exceed 5% of the loan amount if the loan is a higher-priced mortgage
loan.
C) The borrower must receive a written appraisal, but only if the loan amount exceeds $250,000.
D) The loan originator must recommend that the borrower keep at least 20% equity after the refinance.
Correct Answer: B
Rationale:
A – Incorrect. Federal law does not require a 5-year fixed period for cash-out refinances; that applies to
certain qualified mortgages.
B – Correct. Under the Truth in Lending Act (TILA) and Dodd-Frank, a higher-priced mortgage loan
(HPML) with points and fees exceeding 5% of the total loan amount is presumptively non-qualified and
may be prohibited.
C – Incorrect. Appraisals are required for most refinances regardless of loan amount under TILA’s
appraisal rule, with limited exceptions.
D – Incorrect. While LTV matters for pricing, there is no federal requirement to recommend 20% equity
retention.
Question 2
,Under the SAFE Act, which of the following actions requires a mortgage loan originator to be licensed?
A) Preparing loan application forms using software but not discussing terms with the borrower.
B) Presenting a loan offer to a borrower for a residential mortgage loan for compensation.
C) Typing data into a loan origination system at the direction of a licensed MLO.
D) Answering general questions about current mortgage rates on a public website.
Correct Answer: B
Rationale:
A – Incorrect. Data entry without borrower interaction or negotiation does not meet the definition of
“loan originator activities.”
B – Correct. Presenting a loan offer for compensation to a borrower meets the SAFE Act definition of
originating a mortgage loan.
C – Incorrect. Clerical or data entry tasks not involving independent judgment or borrower contact are
exempt.
D – Incorrect. Providing general rate information without individualized analysis is not loan origination.
Question 3
A borrower applies for an FHA loan. The borrower has a credit score of 580 and a 3.5% down payment.
Which of the following is true regarding FHA’s requirements?
A) The borrower must have a minimum 620 credit score for any down payment less than 5%.
B) The borrower is eligible for a 3.5% down payment with a 580 credit score.
C) The borrower must have a 640 credit score if the DTI exceeds 43%.
D) The borrower’s credit score must be at least 600 to qualify for FHA insurance.
Correct Answer: B
Rationale:
A – Incorrect. FHA’s minimum credit score for maximum financing (96.5% LTV) is 580.
B – Correct. FHA allows 3.5% down for credit scores 580 and above; below 580 requires 10% down.
C – Incorrect. DTI over 43% may be allowed with compensating factors; no 640 minimum exists.
D – Incorrect. 500 is the minimum for 90% LTV; 580 for 96.5% LTV.
,Question 4
Which federal law requires lenders to provide a Loan Estimate within three business days of receiving a
mortgage application?
A) Real Estate Settlement Procedures Act (RESPA)
B) Truth in Lending Act (TILA) only
C) TILA-RESPA Integrated Disclosure (TRID) rule
D) Equal Credit Opportunity Act (ECOA)
Correct Answer: C
Rationale:
A – Incorrect. RESPA originally required Good Faith Estimate, but TRID replaced GFE and TIL disclosure
with Loan Estimate.
B – Incorrect. TILA alone did not mandate the three-day Loan Estimate; TRID combines both laws.
C – Correct. TRID (Regulation Z) requires Loan Estimate within 3 business days of application.
D – Incorrect. ECOA prohibits discrimination but does not set disclosure timing.
Question 5
A loan originator learns that a borrower has filed for Chapter 13 bankruptcy 18 months ago, which was
discharged 6 months ago. For a conventional loan backed by Fannie Mae, what is the waiting period
requirement?
A) 2 years from discharge date.
B) 4 years from discharge date.
C) 2 years from dismissal date.
D) No waiting period if borrower has reestablished credit.
Correct Answer: A
Rationale:
A – Correct. Fannie Mae requires 2 years from Chapter 13 discharge date for conventional loans.
B – Incorrect. 4 years applies to Chapter 7 bankruptcy.
, C – Incorrect. Dismissal is different from discharge; discharge is completion.
D – Incorrect. A waiting period is required regardless of credit reestablishment.
Question 6
Under the Fair Housing Act, which of the following is prohibited?
A) Refusing to make a loan because the property is located in a flood zone.
B) Steering a Hispanic borrower to a neighborhood with a high concentration of Hispanic residents.
C) Charging a higher interest rate based on the borrower’s credit score.
D) Requiring a larger down payment for a self-employed borrower.
Correct Answer: B
Rationale:
A – Incorrect. Flood zone is not a protected class; lenders may decline due to flood insurance
requirements.
B – Correct. Steering based on race or national origin is illegal under the Fair Housing Act.
C – Incorrect. Credit score is a permissible risk-based pricing factor.
D – Incorrect. Self-employment is not a protected class; higher down payment may be justified.
Question 7
A borrower receives a Closing Disclosure. How many business days before consummation must the
borrower receive this disclosure?
A) At least 1 business day.
B) At least 3 business days.
C) At least 7 business days.
D) No set time if waived in writing.
Correct Answer: B
Rationale:
A – Incorrect. One day is insufficient under TRID.
