Free MLO Practice Test Questions 2026

Which of the following statements is not true concerning "higher-priced mortgage loans" as defined in the Truth in Lending Act (TILA)?

A. Creditors must verity income and assets in order to determine whether the loan applicant has the ability to repay the loan.

B. Creditors must establish an escrow account for taxes and property insurance on first lien mortgage loans.

C. There are restrictions on prepayment penalties.

D. Borrowers have a five-day right of rescission.

Redlining in mortgage lending refers to which of the following practices?

A. Highlighting areas of concern on an appraisal report

B. Highlighting areas of concern on a mortgage application

C. Denying services to residents in states that a company is not licensed in

D. Denying services to residents of a certain area based on race or ethnicity

A borrower is approved for an 80/20 loan. Which of the following describes the lien priority for the 20% loan?

A. First

B. Second

C. First as it will be combined with the 80% loan

D. Second but combined with any other liens

A second (subordinate) mortgage loan includes:

A. government home purchase loan.

B. conventional home purchase loan.

C. home equity conversion mortgage.

D. home equity lines of credit (HELOCs;

A mortgage loan originator (MLO) closes a high-cost mortgage for a borrower. Seven months later, the borrower returns to the MLO to apply for a cash-out refinance as the borrower intends to use the cash to purchase a collector car. The MLO determines that the only loan the borrower qualifies for is a high-cost mortgage at a higher interest rate. In which of the following ways should the MLO proceed?

A. Deny the loan, unless it is in the best interest of the borrower

B. Close the loan as normal with no further action required

C. Close the loan as normal and take the vehicle as additional collateral

D. Close the loan as normal, as the borrower can refinance a high-cost mortgage after six months

Which of the following responses describes the primary reason to conduct a title search?

A. To confirm the identity of the applicant

B. To determine the amount of homeowner's insurance required

C. To identify any preexisting liens against the collateral property

D. To determine whether a buyer can purchase the collateral property

The Red Flags Rule under the Fair and Accurate Credit Transactions Act (FACTA) require lenders to:

A. adopt best practices for property evaluations as stipulated in the Home Valuation Code of Conduct.

B. adopt a credit score evaluation method utilizing the middle of three repository scores and the lowest of all borrowers' scores.

C. implement a written program to detect warning signs of identity theft.

D. implement an internal watch system to prevent the misrepresentation of occupancy status

In the loan application process, when must specific disclosures be provided to a borrower for an ARM?

A. At closing

B. At first mention of an ARM loan

C. When a loan is locked in

D. Within three days of a complete application

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?

A. 15 calendar days

B. 20 calendar days

C. 30 calendar days

D. 60 calendar days

Within three business days of receiving an application, which of the following information is a creditor required to provide to an applicant?

A. The applicant's right to receive a copy of the appraisal report

B. The applicant's right to select the appraiser

C. A copy of the appraisal report

D. Timeline of the appraisal process

What is the maximum civil penalty that is permitted to be imposed for each violation or failure to comply with the SAFE Act?

A. $2,500 for each act or omission

B. 000 for each act or omission

C. $2,500 for each act or omission; $25,000 maximum

D. $25, 000 for each act or omission: $250,000 maximum

Which of the following loans is subject to right of rescission?

A. A purchase loan secured by a rental home

B. A refinance loan secured by a vacation home

C. A cash-out refinance loan on a primary residence

D. A rate and term refinance loan through the same creditor