Free MLO Practice Test Questions 2026

Private mortgage insurance (PMI) is required to be automatically removed by a lender/servicer when which of the following events occur?

A. When the borrower provides a cancellation request

B. When the principal balance of the loan reaches 78% of the original value when scheduled

C. When the borrower has been current for at least five years and has a loan to value of 80% or less

D. If the borrower produces an appraisal that shows that the borrower currently has more than 20% equity

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?

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

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

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

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

If a borrower is using commission income for 25% or more of their total income, the FHA lender will:

A. Disregard the commission income completely.

B. Only accept one-half of the claimed commission income.

C. Only accept the commission income if it has been steady for three years.

D. Request two years of signed tax returns proving receipt of the income.

The upfront premium charged on an FHA mortgage transaction to protect a creditor in the event of borrower default is an example of:

A. optional credit life insurance.

B. force-placed hazard insurance.

C. government mortgage insurance.

D. private mortgage insurance

A loan secured by any lien other than the first lien position is referred to as:

A. Agency

B. Subordinate

C. Collectible

D. Non-conforming

According to Fannie Mae, a loan with a purchase transaction loan amount of $160,000, sales price of $180,000, and an appraised value of $200,000 has a loan-to-value ratio of what percentage?

A. 80%

B. 88%

C. 89%

D. 90%

A borrower obtaining a VA loan is deployed at the time of loan closing. Which of the following individuals is able to sign on behalf of the borrower?

A. A co-borrower

B. A purchasing spouse

C. A non-purchasing spouse

D. Someone with designated power of attorney

Which of the following statements best describes the index on an ARM?

A. Mortgage lenders control the value of the index.

B. The index rate is fixed for the life of the loan.

C. Index rates vary as the general level of interest rates change.

D. The Federal Reserve adjusts the discount rate index.

A friend contacts a mortgage loan originator (MLO) and asks her to obtain a credit report for him to review before he tries to rent a house. The MLO has access to obtaining credit reports but does not handle any rental applications. Which of the following actions should the MLO take?

A. Offer to obtain the credit report but only if the friend will pay for the cost of the report

B. Ask the friend to provide the MLO with a written authorization to obtain his credit report

C. Explain that the MLO cannot obtain the friend's credit report since he is not looking for a home loan

D. Start a loan application so that the MLO can obtain the credit report and then show the application as "withdrawn"

Which of the following fees must remain the same unless a valid changed circumstance occurs?

A. Total per diem interest

B. Homeowner's insurance

C. Owner's title insurance premium

D. Fees paid to an affiliate of the lender

A revised Closing Disclosure is not required to be provided before a loan consummation in which of the following circumstances?

A. A change in APR

B. A change in loan product

C. An addition of an escrow account

D. An addition of a prepayment penalty

Upon becoming employed by a state-licensed mortgage company, an individual who works for a depository institution as a mortgage loan originator (MLO) shall not be deemed to have temporary authority to act as an MLO in an application state if which of the following events has occurred?

A. The individual has been a witness in a trial at which the defendant was convicted of felony fraud.

B. The individual has been subject to a court order for payment of child support.

C. The individual had an application for an MLO license denied or an MLO license revoked or suspended in any Governmental jurisdiction.

D. The individual has submitted an application to be a state-licensed MLO in the application state and was registered in the NMLS as an MLO by the prior employer.