SAFE Mortgage Loan Originator Test (National Test with Uniform State Content)
General mortgage knowledge: practice questions
Our SAFE MLO Test (NMLS) bank has 56 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.
Question 1
An ARM starts at 4% and has a 2% periodic adjustment cap and a 5% lifetime cap. What is the highest rate it can ever reach?
- 14%
- 11%
- 6%
- 9%
Show the answer
D. 9% — The lifetime cap limits the increase over the life of the loan: 4% + 5% = 9%, however many adjustments occur. The periodic cap only limits each step.
Question 2
One discount point equals:
- 1% of the purchase price
- 1% of the loan amount
- $1,000
- 0.125% of the interest rate
Show the answer
B. 1% of the loan amount — A point is 1% of the loan amount; discount points are paid to lower the interest rate.
Question 3
Which loan is a government loan rather than a conventional loan?
- A loan sold to Fannie Mae
- A jumbo loan held in the lender's own portfolio
- An Alt-A loan
- A loan insured by FHA
Show the answer
D. A loan insured by FHA — Government loans are insured or guaranteed by a federal agency (FHA, VA, USDA); conventional loans are not.
Question 4
Which mortgage insurance does an FHA borrower pay?
- No mortgage insurance
- Private mortgage insurance (PMI) to a private insurer
- A VA funding fee
- FHA's up-front and annual MIP
Show the answer
D. FHA's up-front and annual MIP — FHA loans carry FHA's own mortgage insurance premium; PMI is for conventional loans. The VA program has no mortgage insurance but charges a funding fee.
Question 5
The VA limits seller concessions on a VA loan to:
- 4% of the home's reasonable value
- 2% of the purchase price
- 6% of the loan amount, including all closing costs
- No limit
Show the answer
A. 4% of the home's reasonable value — VA does not limit credits for closing costs, but limits seller's concessions to no more than 4% of the reasonable value.