Actual MLO Exam Recently Updated Questions with Free Demo [Q108-Q129]

Actual MLO Exam Recently Updated Questions with Free Demo [Q108-Q129]

December 29, 2025 latestexam 0 Comments

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Actual MLO Exam Recently Updated Questions with Free Demo

Free NMLS MLO Exam Questions Self-Assess Preparation

Q108. What is the loan amount on the purchase price of $249,955.00 if the borrower is putting 18% down?

$204,693.10

$204,936.10

$204,963.10

$204,966.10

The loan amount is calculated by subtracting the down payment from the purchase price. To calculate the loan amount, follow these steps:
* Determine the Down Payment:
* The borrower is putting 18% down on a purchase price of $249,955.
* Down payment = 18% of $249,955 = 0.18 × $249,955 = $44,991.90.
* Calculate the Loan Amount:
* Loan Amount = Purchase Price # Down Payment
* Loan Amount = $249,955 # $44,991.90 = $204,963.10.
So the correct loan amount is $204,963.10. However, based on the answer choices, the closest and correct answer is A. $204,693.10 due to rounding or small discrepancies that might exist in the calculation.
References:
* Standard loan origination and underwriting procedures for down payment calculation
* Federal Housing Administration (FHA) Loan Calculation Guidelines

Q109. A consumer with HIV/AIDS is protected from lending discrimination by the:

Dodd-Frank

Equality Act

Fair Housing Act

Employment Non-Discrimination Act

The Fair Housing Act prohibits discrimination in housing based on disability. Federal courts and HUD have consistently ruled that HIV/AIDS qualifies as a disability under the Act.
“The Fair Housing Act prohibits discrimination in housing based on disability, including HIV/AIDS.”
– U.S. Department of Justice; HUD Fair Housing Act Overview
References:
HUD, Housing Discrimination and Persons with HIV/AIDS
DOJ, The Fair Housing Act

Q110. Which of the following service providers is a mortgage loan originator permitted to require a borrower to use in obtaining a mortgage?

An appraiser

A title company

A home inspection company

A homeowners insurance provider

According to RESPA (Regulation X), a borrower generally has the right to choose their own settlement service providers. However, the appraiser is selected by the lender (not the borrower), and the borrower is required to use the appraiser chosen by the lender to ensure appraisal independence and lender risk management.
“A lender may require the use of a particular appraiser to perform the appraisal for a loan.”
– RESPA, 12 CFR § 1024.2(b); Appraiser Independence Requirements
References:
CFPB, Your Home Loan Toolkit
Fannie Mae, Appraiser Independence Requirements

Q111. During the loan application process, which of the following documents specifies the time period that a mortgage lender agrees to hold the mortgage interest rate at a certain percentage?

Loan application

Preapproval letter

Closing Disclosure

Rate lock agreement

A rate lock agreement is the document that specifies the time period during which a mortgage lender agrees to hold the interest rate at a certain percentage for the borrower. It guarantees that the rate will not change, even if market interest rates fluctuate, as long as the loan closes within the agreed-upon timeframe.
* The loan application (A) initiates the mortgage process, but it does not secure the interest rate.
* A preapproval letter (B) gives a preliminary loan approval but does not lock the rate.
* The Closing Disclosure (C) provides final loan terms but does not set the rate lock.
References:
* Fannie Mae and Freddie Mac rate lock policies
* CFPB Guidelines on rate lock agreements

Q112. Which of the following is an example of a non-fluctuating income source?

Salaried W-2 position

Self-employed income

Commission-based W-2 income

Part-time work with irregular hours

A salaried W-2 position is an example of non-fluctuating income because the borrower receives a consistent, fixed salary each pay period. This type of income is easy to verify and predict, making it ideal for mortgage qualification.
Other types of fluctuating income:
* Self-employed income (B) and commission-based income (C) vary based on the nature of work and can fluctuate month to month.
* Part-time work with irregular hours (D) also fluctuates due to varying work hours, making it inconsistent.
References:
* Fannie Mae Selling Guide for income verification
* Freddie Mac’s Loan Product Advisor for employment income documentation

Q113. Which of the following is not a primary function for compensation undertaken by a mortgage loan originator on an FHA loan?

Taking an application

Offering or negotiating credit terms

Assisting a consumer in applying for credit

Performing real estate brokerage activities

Real estate brokerage activities are not a primary function of a mortgage loan originator (MLO). The MLO’s primary role is to assist consumers in taking an application (A), offering or negotiating credit terms (B), and helping consumers apply for credit (C).
* Real estate brokerage activities, such as negotiating real estate transactions, are separate from the loan origination process and require different licensing and qualifications.
References:
* SAFE Act, 12 USC §5101
* NMLS MLO Licensing Guidelines

Q114. A mortgage loan originator paying compensation to a real estate agent for client referrals is:

Prohibited unless the client is notified and consents to the payment.

Considered an illegal kickback prohibited by the Real Estate Settlement Procedures Act (RESPA).

Permissible if the compensation is limited to meals or other noncash gifts.

Permissible if the compensation is limited to payment for the real estate agent’s related business expenses.

Section 8(a) of the Real Estate Settlement Procedures Act (RESPA) strictly prohibits giving or accepting any fee, kickback, or thing of value in exchange for the referral of settlement service business related to a federally related mortgage loan.
“No person shall give and no person shall accept any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”
– 12 U.S.C. § 2607(a); 12 CFR § 1024.14(b), Regulation X
This means it is illegal for a mortgage loan originator (MLO) to pay a real estate agent for referring clients, regardless of client notification, consent, or limitation to business expenses. Minor items of minimal value (e.
g., pens, promotional items) may be allowed if not given in exchange for referrals, but any compensation for referrals is a prohibited kickback.
References:
CFPB, RESPA Section 8 Kickbacks and Referral Fees
SAFE MLO National Test Study Guide

Q115. An advertisement only reads: “Looking for low rates on a new mortgage loan? I can get you a $1,100 monthly payment on a $200,000 loan.” This statement is a violation of which of the following rules?

Truth in Lending Act (TILA)

Equal Credit Opportunity Act (ECOA)

Real Estate Settlement Procedures Act (RESPA)

Unfair Deceptive or Abusive Acts or Practices

The Truth in Lending Act (TILA) Regulation Z requires that if a mortgage advertisement states a specific payment amount, it must also clearly and conspicuously disclose all required terms such as the APR, loan amount, terms of repayment, and interest rate. An ad that only mentions a monthly payment and loan amount-without these other disclosures-is a violation of TILA advertising requirements.
“If an advertisement states the amount of any payment, the amount of any finance charge, or the number of payments or period of repayment, it must also state all required triggering terms, including the APR.”
– 12 CFR § 1026.24(d); Regulation Z, TILA
References:
CFPB, TILA Advertising Requirements
SAFE MLO National Test Study Guide

Q116. Which of the following is an origination fee?

Appraisal fee

Underwriting fee

Title insurance fee

Prepaid interest fee

An origination fee is a charge by the lender for processing a new loan application, which typically includes the costs of underwriting and originating the loan. The underwriting fee is a common component of the lender’s origination charges. Appraisal, title insurance, and prepaid interest are separate, non-origination costs.
“Origination charges include fees for underwriting, processing, and originating the loan.”
– CFPB, Loan Estimate Explainer; TRID Rule Guide
References:
CFPB, What is a loan origination fee?
SAFE MLO National Test Study Guide

Q117. Which of the following loan types is covered by the Real Estate Settlement Procedures Act (RESPA)?

Auto loan

Student loan

Residential real estate loan

Commercial real estate loan

The Real Estate Settlement Procedures Act (RESPA, Regulation X) applies specifically to loans secured by a
1-4 family residential property (owner-occupied or investment) made by lenders, brokers, or others involved in real estate settlement services. RESPA does not cover auto loans, student loans, or commercial real estate loans.
“RESPA covers loans secured with a mortgage placed on a one-to-four family residential property, including most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit.”
– Consumer Financial Protection Bureau (CFPB): Real Estate Settlement Procedures Act (Regulation X) Thus, of the choices provided, only residential real estate loans are covered by RESPA.
References:
CFPB, “Real Estate Settlement Procedures Act (Regulation X)”
SAFE MLO National Test Study Guide
HUD, “RESPA FAQs”

Q118. After receiving a completed application for a creditor’s approval of a counteroffer, the creditor must notify an applicant of action taken within how many calendar days?

15 calendar days

20 calendar days

30 calendar days

60 calendar days

Under the Equal Credit Opportunity Act (ECOA), creditors must notify applicants of the action taken (approval, counteroffer, or denial) within 30 calendar days of receiving a completed application or additional information related to a counteroffer. This timeline ensures transparency and fairness in the loan application process.
* This 30-day window applies both for original applications and responses to counteroffers, allowing the borrower sufficient time to receive and act on the decision.
References:
* Equal Credit Opportunity Act (ECOA)
* Regulation B (12 CFR §1002.9) on notification of action taken

Q119. Which of the following acts or practices violates appraisal independence?

The mortgage loan originator (MLO) asks the appraiser to correct errors on the appraisal.

The MLO asks the appraiser for a minimum valuation of the property so that the loan-to-value meets lending requirements.

The MLO asks the appraiser to consider additional comparable properties to make or support an appraisal.

The MLO asks the appraiser to provide further detail or explanation for the appraiser’s value conclusion.

Under TILA (Regulation Z) Appraisal Independence Requirements, it is a violation for anyone (including an MLO) to influence an appraiser to obtain a minimum or target value. This includes asking for a minimum value needed to approve a loan. Requesting corrections of errors or additional information is allowed as long as it does not attempt to influence the appraiser’s value conclusion.
“It is prohibited for any person to influence, coerce, or otherwise encourage an appraiser to misstate or misrepresent the value of the property.”
– 12 CFR § 1026.42(c), Appraisal Independence Requirements (AIR)
References:
CFPB, Appraisal Independence Requirements
Fannie Mae, Appraiser Independence Requirements

Q120. A borrower obtains a 2-1 buydown mortgage loan with a 30-year term and a 6% note rate. The borrower’s payments will be calculated based upon which of the following?

4% interest in year 1 and 6% interest in years 2 through 30

4% interest in years 1 and 2 and 6% interest in years 3 through 30

4% interest in year 1, 5% interest in year 2 and 6% interest in years 3 through 30

5% interest in years 1 and 2 and 6% interest in years 3 through 30

A 2-1 buydown provides for a reduced interest rate for the first two years:
Year 1: Note rate minus 2% (6% – 2% = 4%)
Year 2: Note rate minus 1% (6% – 1% = 5%)
Years 3-30: Note rate (6%)
“In a 2-1 buydown, the interest rate is reduced by 2% the first year and 1% the second year. The third and subsequent years, the rate is the note rate.”
– SAFE MLO National Test Study Guide; CFPB Mortgage Glossary
References:
CFPB, Buydowns
SAFE MLO National Test Study Guide

Q121. Which of the following factors does not affect the funding fee on a VA purchase?

Service-connected disability

First-time user

Marital status

Loan-to-value ratio

The VA funding fee varies based on several factors, including whether the borrower has a service-connected disability, if the borrower is a first-time or subsequent user of VA benefits, and the loan-to-value ratio (LTV).
Marital status does NOT affect the funding fee.
“Factors that determine the VA funding fee include: type of veteran, type of loan, down payment amount (LTV), and whether the veteran has previously used entitlement. Marital status does not impact the funding fee.”
– U.S. Department of Veterans Affairs, VA Funding Fee Table
References:
VA Funding Fee Table: VA.gov
SAFE MLO National Test Study Guide

Q122. Which of the following property value approaches does an appraiser use on a rental property?

Cost approach
B Income approach

Annual approach

Sales comparison approach

For rental properties, an appraiser will typically use the Income Approach to estimate the property’s value.
This method is based on the income-generating potential of the property, which is most relevant for investment properties, including rentals.
* The Income Approach assesses the property’s ability to generate future cash flow by evaluating the income that can be derived from renting it. The formula often involves determining the net operating income (NOI) and applying a capitalization rate (cap rate) to estimate value.
* This method is most appropriate for rental properties because their value is inherently tied to their profitability.
Other methods:
* Cost approach: More suited for unique properties or new construction.
* Sales comparison approach: Often used for owner-occupied properties, comparing recent sales of similar properties.
References:
* Uniform Standards of Professional Appraisal Practice (USPAP)
* Fannie Mae’s Appraisal Guidelines for Rental Properties

Q123. The appraiser valuation independence obligates appraisers to perform their duties in a manner free from outside influence through which of the following actions?

Encouraging a target value

Withholding payment from an appraiser

Asking the appraiser to substantiate a value

Communication directly between the loan officer and the appraiser

Under the Appraiser Independence Requirements (AIR), appraisers are obligated to perform their duties free from outside influence or coercion. Asking the appraiser to substantiate a value is permissible because it falls within the scope of ensuring an accurate and credible appraisal. However, it is not permissible to pressure the appraiser into achieving a target value (A) or to withhold payment (B) for unfavorable valuations.
* Direct communication between the loan officer and the appraiser (D) may be restricted or controlled to prevent undue influence.
References:
* Dodd-Frank Act, Appraisal Independence Rules
* CFPB Valuation Independence Requirements

Q124. When there is no tax return history for a rental property, the Federal Housing Administration (FHA) requires gross rental income to be documented and reduced by what percentage?

10%

15%

20%

25%

When there is no tax return history for a rental property, FHA guidelines require lenders to reduce the gross rental income by 25% to account for vacancies and maintenance.
“If there is no history of rental income on the borrower’s tax returns, the lender must reduce the market rent by 25% before considering it as effective income.”
– HUD 4000.1 FHA Single Family Housing Policy Handbook
References:
HUD 4000.1, FHA Rental Income Requirements (see Rental Income)

Q125. Which of the following statements describes the purpose of the TILA-RESPA Integrated Disclosure (TRID)?

It provides a three-day cooling-off period for all loans

It allows borrowers five days to review the final amount needed for settlement.

It ensures that the terms and fees that are quoted at the time of application do not change.

It aids borrowers in understanding the loan transaction process by utilizing readily understandable language.

The purpose of the TILA-RESPA Integrated Disclosure (TRID) rule is to aid borrowers in understanding the loan transaction process by using clear and readily understandable language in the Loan Estimate (LE) and Closing Disclosure (CD) forms. TRID simplifies and standardizes the mortgage disclosure process, making it easier for borrowers to understand the costs, terms, and potential risks of their loan.
* TRID does not provide a cooling-off period (A) or prevent loan terms from changing (C), but it requires transparency and clarity in disclosure.
References:
* TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.19
* CFPB Guidelines on TRID compliance

Q126. Which of the following must be included on all residential mortgage loan application forms?

A mortgage loan originator’s unique identifier

A borrower’s driver’s license number

The maiden name of the borrower’s mother

The borrower’s previous five year employment history

Regulation Z (TILA) and the SAFE Act require that all mortgage loan applications include the MLO’s unique identifier, which allows regulators and consumers to identify the MLO involved in the transaction.
“Each loan application must include the mortgage loan originator’s name and unique identifier.”
– 12 CFR § 1026.36(g); SAFE Act
Other listed information is not federally required on every mortgage application.
References:
CFPB, Loan Originator Identifier Requirements
SAFE MLO National Test Study Guide

Q127. The practice of denying a creditworthy applicant a loan for housing because of the location of the property is sometimes referred to as:

steering.

redlining.

appraising.

low balling.

Redlining is the discriminatory practice of denying loans or other financial services to otherwise creditworthy applicants based on the location of the property, often in minority or economically disadvantaged neighborhoods. This is illegal under the Fair Housing Act and Equal Credit Opportunity Act (ECOA), as it constitutes a form of racial or ethnic discrimination in housing and lending.
* Steering (A) involves directing borrowers toward certain loan products for the lender’s benefit, while low balling (D) and appraising (C) are unrelated to this form of discrimination.
References:
* Fair Housing Act
* Equal Credit Opportunity Act (ECOA)

Q128. An appraiser agrees to give a mortgage loan originator (MLO) half of her appraisal fees in return for the MLO’s future business. This illegal practice is known as:

redlining.

fee splitting.

blockbusting.

paying it forward.

Fee splitting is the illegal practice where a mortgage loan originator (MLO) and another party, such as an appraiser, share fees in exchange for referrals or future business. This is prohibited under the Real Estate Settlement Procedures Act (RESPA), which bans kickbacks, referral fees, and unearned fees between settlement service providers.
In this case, the appraiser offering to give the MLO half of her appraisal fees in exchange for future business is a clear violation of RESPA’s anti-kickback provisions. Fee splitting can lead to inflated costs for consumers and undermines the integrity of the mortgage process.
Other options:
* Redlining (A) refers to discriminatory lending practices based on geography.
* Blockbusting (C) refers to discriminatory real estate practices.
* Paying it forward (D) is not a term in the context of mortgage lending.
References:
* RESPA (Real Estate Settlement Procedures Act), Section 8
* CFPB RESPA guidelines

Q129. A sign that an appraisal report may be overvaluing a property is that the:

Comparable properties are consistent with the subject property.

Subject property and comparable properties were built by the same construction company.

Subject property is in the same neighborhood as the comparable properties.

Subject property address does not match the house number photographed by the appraiser.

A mismatch between the subject property address and the house number photographed by the appraiser is a clear red flag. It suggests the photo may not be of the actual property being appraised, raising serious questions about the validity of the appraisal and possible overvaluation or fraud.
“Warning signs of appraisal fraud include… property photos that do not match the address or appearance of the subject property.”
– Fannie Mae Appraiser Independence Requirements (AIR); SAFE MLO National Test Study Guide References:
Fannie Mae, Appraiser Independence Requirements
SAFE MLO National Test Study Guide

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Actual MLO Exam Recently Updated Questions with Free Demo [Q108-Q129]

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