- Official section
- National IV: Financing
- Broker weight
- Approximately 10 of 100 scored national questions
- Expected scored items
- The current PSI broker outline assigns about 10% of the national portion to Financing
National practice guide
Name the document, feature, program, market, or law before calculating
A financing question can mention a lender, note, mortgage, adjustable rate, government program, disclosure, ratio, and payment in the same paragraph. Do not let the first familiar term choose the answer. Identify what the question asks, classify each fact by role, and only then use the relevant rule or formula.
Last updated: August 1, 2026
What skill does this practice set measure?
Short answer: Practice Financing in five connected layers. First, separate the debt from its collateral: the promissory note is the repayment promise, while the mortgage or deed of trust secures that promise with real property. Second, identify loan structure, including fixed, adjustable, amortized, balloon, interest-only, reverse, equity, construction, rehab, bridge, and seller financing. Third, distinguish conventional lending from FHA insurance, VA guaranty, and USDA support, and separate origination in the primary market from investment and liquidity in the secondary market. Fourth, match federal law to its purpose: RESPA and Regulation X for covered settlement practices, TILA and Regulation Z for credit-cost disclosures and related rules, TRID for the Loan Estimate and Closing Disclosure framework, and ECOA and Regulation B for equal credit opportunity. Fifth, solve the requested math using the correct base and period: LTV, points, debt ratios, PITI, interest, and mortgage insurance. In every scenario, state borrower, lender, document, collateral, feature, program, market, rule, required action, timing, and formula before deciding.
Actual lending depends on current statutes, regulations, official interpretations, lender overlays, investor guides, program handbooks, borrower eligibility, property eligibility, credit, income, assets, appraisal, insurance, disclosures, and transaction documents. Program limits, fees, underwriting thresholds, interest rates, mortgage-insurance rules, and disclosure forms can change. A national question usually supplies the numerical assumptions it needs. Do not substitute a memorized market rate, debt-ratio limit, down-payment amount, point-to-rate tradeoff, or program requirement when the stem supplies another fact. This guide teaches exam classification and setup, not credit, loan, tax, legal, appraisal, or financial advice. Sources were checked through August 1, 2026.
Ready to work the set?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. Which document contains a borrower's promise to repay?
- Promissory note
- Mortgage
- Deed
- Title policy
Show answer and explanation
Answer: Promissory note
The note evidences the debt. A mortgage or deed of trust secures that debt with real property.
2. A loan's rate is based on an index plus margin and can change subject to caps. What is it?
- Adjustable-rate mortgage
- Fixed-rate mortgage
- Fully amortized constant-rate note only
- Deed restriction
Show answer and explanation
Answer: Adjustable-rate mortgage
Index, margin, adjustment periods, and caps are characteristic ARM terms.
3. Which program provides federal mortgage insurance?
- FHA
- VA
- Conventional conforming only
- Private seller only
Show answer and explanation
Answer: FHA
FHA insures eligible loans made through approved lenders; VA uses a guaranty framework for eligible borrowers.
4. A $270,000 loan uses a $300,000 stated value base. What is the LTV?
- 90%
- 10%
- 111.11%
- 81%
Show answer and explanation
Answer: 90%
$270,000 / $300,000 = 0.90, or 90%.
5. Which federal framework most directly prohibits discrimination in a credit transaction?
- ECOA and Regulation B
- RESPA only
- CERCLA
- Sherman Act only
Show answer and explanation
Answer: ECOA and Regulation B
ECOA and Regulation B govern equal credit opportunity and related creditor duties.
Which answer habits should you watch for?
- Trap
- Call the mortgage the promise to repay.
- Correction
- The note contains the promise; the mortgage or deed of trust supplies security.
- Trap
- Reverse mortgagor and mortgagee.
- Correction
- The borrower mortgagor gives the mortgage to the lender mortgagee.
- Trap
- Assume an ARM has no limits.
- Correction
- Read its index, margin, adjustment timing, and rate or payment caps.
- Trap
- Treat a balloon loan as fully paid after regular installments.
- Correction
- Check the substantial balance remaining at maturity.
- Trap
- Say FHA or VA makes every program loan directly.
- Correction
- Distinguish private origination from federal insurance or guaranty.
- Trap
- Use conventional and conforming as exact synonyms.
- Correction
- Conventional describes no government insurance or guaranty; conforming describes investor eligibility standards.
- Trap
- Place Fannie Mae and Freddie Mac in the borrower origination role.
- Correction
- Use primary for origination and secondary for post-origination liquidity and investment.
- Trap
- Assume one universal debt-ratio approval limit.
- Correction
- Use the ratio and underwriting facts supplied or the current applicable program source.
- Trap
- Calculate points from purchase price.
- Correction
- Point dollars use loan amount as the base.
- Trap
- Add annual tax directly to monthly P&I.
- Correction
- Convert every PITI component to one month before addition.
- Trap
- Treat RESPA, TILA, and ECOA as interchangeable acronyms.
- Correction
- Match each framework to its regulated event and consumer protection.
- Trap
- Use a memorized current interest rate in an exam calculation.
- Correction
- Use the rate and assumptions stated in the problem.
How should you reason through a difficult item?
Separate the note from the mortgage
Scenario: A question asks which document contains the borrower's promise to repay principal and interest and which document creates the real-property security interest.
- The promise and debt terms belong in the promissory note.
- The mortgage or deed of trust supplies the real-property collateral relationship.
- The documents are connected but perform different legal functions.
Answer: The note evidences the debt; the mortgage or deed of trust secures it.
Identify an adjustable rate
Scenario: A loan's future note rate equals a published index plus a lender margin, subject to periodic and lifetime limits.
- The index can move with the referenced market measure.
- The margin is added under the note's adjustment formula.
- Caps limit specified changes but do not make the loan fixed.
Answer: The facts describe an adjustable-rate mortgage.
Distinguish FHA and VA
Scenario: One loan is federally insured through an approved-lender program. Another is supported by a guaranty for an eligible veteran.
- Federal insurance points to FHA.
- Eligible-veteran guaranty points to VA.
- Neither label means the agency necessarily originated the ordinary private loan.
Answer: The first is FHA-insured; the second is VA-guaranteed.
Calculate LTV
Scenario: A simplified problem gives a $340,000 loan and a $400,000 value base. What is LTV?
- LTV equals loan divided by the stated value base.
- $340,000 / $400,000 = 0.85.
- Convert the decimal to 85%.
Answer: The LTV is 85%.
Calculate point dollars
Scenario: A borrower pays 1.25 points on a $320,000 loan. What is the dollar charge?
- One point equals 1% of loan amount.
- Convert 1.25% to 0.0125.
- $320,000 x 0.0125 = $4,000.
Answer: The point charge is $4,000.
Match the federal law
Scenario: A creditor applies a different credit standard because an applicant belongs to a protected group.
- The conduct concerns discrimination in a credit transaction.
- ECOA and Regulation B govern equal credit opportunity.
- RESPA settlement-service rules do not replace the credit-discrimination analysis.
Answer: The central federal framework is ECOA and Regulation B.
How should you solve a Financing practice question?
- Identify whether the question asks about a document, clause, loan structure, program, market, law, underwriting decision, disclosure, or calculation.
- Name the parties and their roles, including borrower, lender, seller creditor, guarantor, insurer, investor, servicer, or regulator.
- Separate the repayment obligation from collateral and the loan feature from the government or investor program.
- Place the event on the timeline from application and estimate through underwriting, approval, closing, servicing, default, and payoff.
- Match federal law to the regulated event, protected consumer interest, required action, and timing supplied by the facts.
- For math, label the target, formula, percentage base, value definition, time period, and required answer unit.
- Test the nearest competing choice by stating the missing fact it would require.
- Use current official program and regulatory sources in real practice and avoid inventing a market rate or approval threshold.
- Question signal
- Promise to repay
- Likely concept
- Promissory note
- Critical check
- Debt terms
- Question signal
- Real property as collateral
- Likely concept
- Mortgage or deed of trust
- Critical check
- Security interest
- Question signal
- Balance due after default
- Likely concept
- Acceleration
- Critical check
- Trigger and entire debt
- Question signal
- Rate can reset
- Likely concept
- ARM
- Critical check
- Index, margin, caps, timing
- Question signal
- Large amount due at maturity
- Likely concept
- Balloon
- Critical check
- Remaining principal
- Question signal
- Federal mortgage insurance
- Likely concept
- FHA
- Critical check
- Eligible loan and lender
- Question signal
- Eligible veteran guaranty
- Likely concept
- VA
- Critical check
- Borrower and entitlement
- Question signal
- Lender originates to borrower
- Likely concept
- Primary market
- Critical check
- Initial transaction
- Question signal
- Referral fee for settlement business
- Likely concept
- RESPA
- Critical check
- Covered service and exception
- Question signal
- Loan divided by value
- Likely concept
- LTV
- Critical check
- Correct value base
Which outline areas does this set sample?
- Topic
- Promissory note
- What to know
- Borrower, lender, promise, principal, interest, payment, maturity, default, negotiable instrument, evidence of debt, and obligation
- Best exam move
- Choose the note when the question asks where the repayment promise and debt terms appear.
- Topic
- Mortgage or deed of trust
- What to know
- Security instrument, collateral, real property, lien, mortgagor, mortgagee, trustor, beneficiary, trustee, foreclosure, and release
- Best exam move
- Choose the security instrument when the question asks what subjects real property to the debt.
- Topic
- Mortgage clauses
- What to know
- Acceleration, alienation, due on sale, defeasance, prepayment, subordination, insurance, taxes, assignment of rents, default, and release
- Best exam move
- Match the triggering event to the clause's function rather than its familiar wording alone.
- Topic
- Lien theory and title theory
- What to know
- Lien, legal title, equitable title, security interest, borrower possession, foreclosure method, jurisdiction, deed of trust, and no universal procedure
- Best exam move
- Use the jurisdictional rule supplied by the question and do not infer foreclosure procedure from one label alone.
- Topic
- Fixed and adjustable rates
- What to know
- Fixed rate, ARM, index, margin, initial rate, adjustment period, rate cap, payment cap, lifetime cap, reset, and risk
- Best exam move
- Separate the market index from lender margin and identify which cap limits which change.
- Topic
- Amortized, balloon, and interest-only loans
- What to know
- Principal reduction, level payment, negative amortization, maturity, balance, balloon payment, interest-only period, term, and payment structure
- Best exam move
- Trace what happens to principal over time and what remains due at maturity.
- Topic
- Conventional and conforming loans
- What to know
- Private lending, no government insurance, conforming, nonconforming, investor standard, conventional, mortgage insurance, down payment, and lender risk
- Best exam move
- Do not use conventional and conforming as exact synonyms or assume every conventional loan avoids mortgage insurance.
- Topic
- FHA loans
- What to know
- Federal Housing Administration, insurance, approved lender, borrower, property, mortgage insurance premium, handbook, eligibility, appraisal, and no direct-lender assumption
- Best exam move
- Identify federal insurance rather than a VA guaranty or ordinary conventional structure.
- Topic
- VA loans
- What to know
- Department of Veterans Affairs, guaranty, certificate of eligibility, veteran, service member, survivor, entitlement, funding fee, lender, appraisal, and occupancy
- Best exam move
- Identify the eligible borrower and VA guaranty without assuming the agency makes every loan.
- Topic
- USDA loans
- What to know
- Rural Development, eligible rural area, household income, guarantee, direct program, lender, property, primary residence, eligibility, and program distinction
- Best exam move
- Check area, borrower, and program facts rather than treating USDA as a general urban loan.
- Topic
- Seller financing
- What to know
- Installment sale, land contract, contract for deed, purchase-money mortgage, seller lender, note, security, title, default, disclosure, and federal rule
- Best exam move
- Identify who extends credit, who holds title or security, and what documents the stated arrangement creates.
- Topic
- Reverse and home-equity lending
- What to know
- Reverse mortgage, eligible homeowner, equity conversion, repayment trigger, home equity loan, HELOC, lump sum, credit line, second lien, and consumer protection
- Best exam move
- Separate a reverse-mortgage repayment structure from a closed-end equity loan and revolving HELOC.
- Topic
- Construction, rehab, and bridge loans
- What to know
- Draw, inspection, completion, short term, permanent financing, renovation, acquisition, existing property, timing gap, collateral, and conversion
- Best exam move
- Match loan purpose and duration to construction, improvement, or temporary transition needs.
- Topic
- Primary and secondary markets
- What to know
- Origination, borrower, lender, sale, investor, mortgage-backed security, liquidity, Fannie Mae, Freddie Mac, Ginnie Mae, and servicing
- Best exam move
- Choose primary for lender-to-borrower origination and secondary for post-origination investment activity.
- Topic
- Underwriting and qualification
- What to know
- Income, debt, assets, credit, employment, reserves, collateral, appraisal, housing ratio, total debt ratio, compensating factor, and lender standard
- Best exam move
- Use the inputs and ratios supplied rather than assuming one universal approval threshold.
- Topic
- LTV, PMI, points, and PITI
- What to know
- Loan, value, percentage, private mortgage insurance, risk, point, loan base, principal, interest, tax, insurance, annual, and monthly
- Best exam move
- Name each formula's base and align the payment period before calculating.
- Topic
- RESPA, TILA, TRID, and ECOA
- What to know
- Regulation X, settlement service, referral fee, escrow, servicing, Regulation Z, finance charge, APR, Loan Estimate, Closing Disclosure, Regulation B, discrimination, and notice
- Best exam move
- Match the regulated event and consumer protection to the correct federal framework.
- Topic
- Application through closing
- What to know
- Application, Loan Estimate, intent to proceed, documentation, underwriting, appraisal, title, approval, conditions, Closing Disclosure, consummation, rescission, and servicing
- Best exam move
- Place the document, decision, and disclosure at the correct point in the lending timeline.
What should you sort out before you begin?
- Terms
- Promissory note vs. mortgage
- Difference
- The note evidences the debt and promise. The mortgage or deed of trust secures it with real property.
- Question cue
- Obligation versus collateral.
- Terms
- Mortgagor vs. mortgagee
- Difference
- The mortgagor is the borrower granting the mortgage. The mortgagee is the lender receiving the security interest.
- Question cue
- Giver of lien versus holder of lien.
- Terms
- Fixed rate vs. ARM
- Difference
- A fixed rate remains stated for the loan term. An ARM can change under its index, margin, timing, and cap provisions.
- Question cue
- Stable note rate versus rule-based adjustment.
- Terms
- Amortized loan vs. balloon loan
- Difference
- An amortized schedule reduces principal through payments. A balloon structure leaves a substantial balance due at maturity.
- Question cue
- Scheduled reduction versus maturity lump sum.
- Terms
- Conventional vs. government-supported loan
- Difference
- Conventional financing lacks FHA insurance or VA or USDA guaranty. Government support changes program risk and eligibility rules.
- Question cue
- Private risk structure versus federal program support.
- Terms
- FHA insurance vs. VA guaranty
- Difference
- FHA insures eligible mortgages. VA guarantees part of eligible loans for qualifying borrowers.
- Question cue
- Insurance program versus veteran guaranty.
- Terms
- Primary vs. secondary mortgage market
- Difference
- The primary market originates loans with borrowers. The secondary market buys, sells, funds, or securitizes existing mortgage interests.
- Question cue
- Origination versus post-closing liquidity.
- Terms
- LTV vs. down-payment percentage
- Difference
- LTV compares loan with the required value base. Down-payment percentage describes the buyer's contribution and is not always the exact underwriting complement in a complex transaction.
- Question cue
- Loan ratio versus buyer contribution.
- Terms
- Loan Estimate vs. Closing Disclosure
- Difference
- The Loan Estimate provides early standardized loan and closing-cost information. The Closing Disclosure presents final transaction terms and costs before consummation under applicable timing rules.
- Question cue
- Early estimate versus final disclosure.
- Terms
- RESPA vs. ECOA
- Difference
- RESPA regulates covered settlement-service practices and disclosures. ECOA prohibits discrimination in credit and governs related creditor duties.
- Question cue
- Settlement process versus equal credit opportunity.
How should you review your results?
- Session
- Session 1
- Focus
- Separate documents and clauses
- Proof you are ready
- Classify 40 note, mortgage, deed-of-trust, lien, title, acceleration, alienation, defeasance, prepayment, and subordination scenarios.
- Session
- Session 2
- Focus
- Compare loan structures
- Proof you are ready
- Explain fixed, ARM, amortized, balloon, interest-only, reverse, equity, construction, rehab, and bridge structures from payment and purpose facts.
- Session
- Session 3
- Focus
- Compare programs and markets
- Proof you are ready
- Distinguish conventional, conforming, FHA, VA, USDA, seller financing, primary market, secondary market, investor, and servicer roles.
- Session
- Session 4
- Focus
- Practice federal lending law
- Proof you are ready
- Match 40 settlement, disclosure, credit-cost, discrimination, application, estimate, closing, and servicing prompts to current federal frameworks.
- Session
- Session 5
- Focus
- Practice underwriting and math
- Proof you are ready
- Solve 30 LTV, point, PITI, ratio, interest, and mortgage-insurance setups with bases, periods, and units labeled.
- Session
- Session 6
- Focus
- Complete mixed Financing practice
- Proof you are ready
- Score at least 85% on two fresh timed sets and identify document, feature, program, market, law, or formula for every uncertain item.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
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Questions students ask about Financing Practice Questions
How many Financing questions are on the national real estate exam?
The PSI broker outline effective June 24, 2026 assigns approximately 10 of 100 scored national questions to Financing. Financing facts can also support questions classified under Real Estate Math, Contracts, Valuation, or Practice of Real Estate.
What Financing topics are on the current broker outline?
The current area includes points, LTV, PMI, interest, PITI, debt ratios, credit scoring, underwriting, notes and security instruments, mortgage clauses, conventional and alternative loan structures, FHA, VA, USDA, seller financing, reverse and equity loans, construction and bridge lending, federal lending law, and the lending path from application through closing.
What is the difference between a note and a mortgage?
The promissory note contains the borrower's promise and debt terms. The mortgage or deed of trust creates the security interest in real property. The note is evidence of the obligation; the security instrument provides collateral remedies under applicable law.
What is the difference between FHA, VA, and USDA loans?
FHA insures eligible loans made by approved lenders. VA guarantees a portion of eligible loans for qualifying veterans, service members, and certain survivors. USDA supports eligible rural housing through its programs. The government generally does not replace the private lender in the ordinary guaranteed or insured transaction.
What federal lending laws should I practice?
Know the broad functions of RESPA and Regulation X, TILA and Regulation Z, TRID disclosures, ECOA and Regulation B, and the federal rules named by the current outline. Practice matching the law to settlement services, cost and credit disclosures, equal credit opportunity, timing, and prohibited conduct rather than memorizing initials alone.
How do I calculate LTV?
LTV equals loan amount divided by the value base required by the problem, expressed as a percentage. To find loan amount, multiply value by decimal LTV. To find value, divide loan by decimal LTV. Do not assume purchase price is always the underwriting value when a question supplies both price and appraisal facts.
How are mortgage points calculated?
One point equals 1% of loan amount. Multiply the loan by the decimal point rate to find the dollar charge. A point does not mean one percentage point of purchase price and does not guarantee a fixed interest-rate reduction across lenders, products, or dates.
What is included in PITI?
PITI means principal, interest, property taxes, and homeowners insurance in its narrow form. A broader housing payment or PITIA can include mortgage insurance, association dues, or other stated components. Align annual and monthly periods before addition and answer the specific total requested.
What practice score should I target in Financing?
Aim for at least 85% on fresh mixed Financing sets and explain the document, loan structure, program, market, law, underwriting input, or formula that controls every uncertain answer. Keep formula errors separate from arithmetic errors.
Are these official PSI Financing questions?
No. They are original practice examples aligned to the current PSI broker outline. The current outline and primary CFPB, HUD, VA, USDA, and Fannie Mae sources were checked through August 1, 2026.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- Consumer Financial Protection Bureau, current mortgage explanation
- Consumer Financial Protection Bureau, Loan Estimate explainer
- Consumer Financial Protection Bureau, Closing Disclosure explainer
- Consumer Financial Protection Bureau, current Regulation X
- Consumer Financial Protection Bureau, current Regulation Z
- Consumer Financial Protection Bureau, current Regulation B
- U.S. Department of Housing and Urban Development, current FHA Single Family Housing Handbook
- U.S. Department of Veterans Affairs, current VA home-loan information
- USDA Rural Development, current guaranteed housing-loan program
- Fannie Mae Selling Guide, current LTV definitions
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.