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. A borrower has a gross monthly income of $6,000 and a proposed PITI payment of $1,500. What is the front-end DTI ratio?

    Answer: 25%

    Front-end DTI = $1,500 / $6,000 = 25%.

  2. Which loan component is included in PITI but NOT in the principal and interest payment?

    Answer: Hazard insurance escrow

    PITI stands for Principal, Interest, Taxes, and Insurance — escrow items added on top of P&I.

  3. A $200,000 mortgage at 6% annual interest has a first-month interest charge of how much?

    Answer: $1,000

    $200,000 × 0.06 / 12 = $1,000 in interest for the first month.

  4. What does a loan's Annual Percentage Rate (APR) represent compared to the note rate?

    Answer: The cost of credit expressed as a yearly rate including fees

    APR includes the interest rate plus fees and costs, providing a broader measure of borrowing cost.

  5. On a $300,000 loan with 2 discount points, how much does the borrower pay upfront for the points?

    Answer: $6,000

    Each point equals 1% of the loan amount; 2 points × $300,000 = $6,000.

  6. A borrower's loan has a LTV of 85%. If the appraised value is $400,000, what is the loan amount?

    Answer: $340,000

    $400,000 × 0.85 = $340,000.

  7. Which amortization type results in the borrower owing more than the original loan balance after making scheduled payments?

    Answer: Negative amortization

    Negative amortization occurs when payments are less than the interest due, causing the balance to increase.