Practice Test Geeks(NMLS) National Mortgage Licensing System Practice Test
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Loan Application and Qualification 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 Loan Application and Qualification flashcards as text

  1. What does PITI stand for in mortgage payment calculations?

    Answer: Principal, Interest, Taxes, Insurance

    PITI stands for Principal, Interest, Taxes, and Insurance — the four components that make up a borrower's total monthly housing payment.

  2. A borrower wants to use rental income from a property they own to qualify. Under standard guidelines, how much of the gross rental income can typically be used?

    Answer: 75%

    Most guidelines allow 75% of gross rental income to be used for qualifying, accounting for vacancy and maintenance expenses.

  3. Which of the following loan types is backed by the U.S. Department of Agriculture and targets rural homebuyers?

    Answer: USDA loan

    USDA loans are guaranteed by the U.S. Department of Agriculture and offer 100% financing for eligible borrowers in designated rural and suburban areas.

  4. What is the significance of the 'three-day right of rescission' in mortgage lending?

    Answer: The borrower has 3 days to cancel a refinance of their primary residence

    Under TILA (Truth in Lending Act), borrowers refinancing their primary residence have 3 business days to rescind (cancel) the transaction after consummation.

  5. For VA loans, what is the VA funding fee exemption that automatically applies without the borrower requesting it?

    Answer: Veterans receiving VA disability compensation of 10% or more

    Veterans rated with a service-connected disability of 10% or more (and surviving spouses of veterans who died in service) are exempt from the VA funding fee.

  6. What is the primary purpose of the Automated Underwriting System (AUS) in mortgage lending?

    Answer: To provide a risk assessment recommendation based on borrower data

    AUS platforms like Fannie Mae's Desktop Underwriter (DU) and Freddie Mac's Loan Product Advisor (LPA) analyze borrower data to issue an Approve/Eligible or similar risk assessment.

  7. A borrower lists a 401(k) account on their loan application. Under standard conventional guidelines, what percentage of vested retirement assets can be counted toward reserves?

    Answer: 70%

    Fannie Mae guidelines allow 60% of vested retirement account balances to be counted as reserves, accounting for potential early withdrawal penalties and taxes.