- Official section
- National IV
- Broker weight
- 10%
- Expected scored items
- About 10 of 100 national items
National Section IV study guide
Financing for the Illinois broker exam
Financing questions become easier when you separate the debt, the security, the loan program, the payment calculation, and the consumer-protection rule. Identify the layer being tested before reaching for a formula or a familiar acronym.
What does this exam area cover?
Short answer: Know loan and payment math, underwriting, mortgage clauses, promissory notes, conventional and government-backed loan types, seller and equity financing, construction and bridge products, RESPA, TILA and Regulation Z, TRID, ECOA and Regulation B, the application-to-closing process, and risky features.
This section tests national lending principles and federal law. Product rules, limits, fees, and eligibility can change. Use current official program information in practice, and use the facts supplied by the exam rather than memorizing a temporary dollar limit.
Practice the topic in Pass Illinois
From concept to decision
Drill this topic, then review the explanation
Pass Illinois gives you original national and Illinois questions, topic-by-topic study, clear explanations, timed practice, flashcards, progress tracking, and Math Coach. Start free, find the weak distinction, and focus the next session there.
What is on the official outline?
- Topic
- Loan math and payment terminology
- What to know
- Points, loan-to-value ratio, private mortgage insurance, interest, principal, taxes, insurance, and PITI
- Best exam move
- Write the requested quantity, base amount, rate, and period before calculating.
- Topic
- Underwriting
- What to know
- Income, assets, credit history and score, debts, debt ratios, collateral, documentation, and risk evaluation
- Best exam move
- Separate borrower capacity and credit from collateral value and loan-program eligibility.
- Topic
- Mortgage or deed-of-trust clauses
- What to know
- Security, acceleration, due-on-sale, defeasance, prepayment, insurance, taxes, occupancy, and default conditions
- Best exam move
- Identify the event that activates the clause and the party it protects.
- Topic
- Promissory note
- What to know
- Borrower promise, principal, interest, repayment terms, maturity, default, and negotiability concepts
- Best exam move
- Choose the note when the stem asks for evidence of debt or promise to repay.
- Topic
- Conventional and payment-structure loans
- What to know
- Conventional, fully amortized, partially amortized balloon, interest-only, and adjustable-rate mortgages
- Best exam move
- Separate who backs the loan from how principal, interest, rate, and maturity work.
- Topic
- Government loan programs
- What to know
- FHA-insured, VA-guaranteed, and USDA Rural Development programs
- Best exam move
- Remember insure, guarantee, eligibility, occupancy, and property requirements without treating the agency as the ordinary lender.
- Topic
- Seller, equity, and special-purpose financing
- What to know
- Installment or land contract, contract for deed, reverse mortgage, home equity loan, HELOC, construction, rehabilitation, and bridge loan
- Best exam move
- Identify the collateral, repayment trigger, lien position, draw structure, and temporary or long-term purpose.
- Topic
- RESPA and Regulation X
- What to know
- Covered settlement services, kickbacks, referral fees, unearned fees, affiliated arrangements, escrow, and servicing
- Best exam move
- Look for a thing of value tied to a referral or a charge split without actual services.
- Topic
- TILA and Regulation Z
- What to know
- Cost-of-credit disclosures, APR, finance charges, advertising, rescission for applicable transactions, and mortgage requirements
- Best exam move
- Identify whether the issue is credit cost, disclosure, advertising, or a transaction-specific right.
- Topic
- TRID
- What to know
- Loan Estimate, Closing Disclosure, covered transaction, application trigger, timing, changed circumstances, and consummation
- Best exam move
- Match the document to the stage and use the rule's business-day definition for the specific requirement.
- Topic
- ECOA and Regulation B
- What to know
- Protected bases, application evaluation, adverse action, discouragement, information requests, signatures, and valuations
- Best exam move
- Apply neutral credit standards consistently and use the current statutory and regulatory rule.
- Topic
- Lending process and risky features
- What to know
- Prequalification, preapproval, application, disclosures, processing, underwriting, appraisal, conditions, closing, funding, servicing, prepayment penalty, and balloon risk
- Best exam move
- Place the event on the timeline and identify who makes the credit decision.
Which distinctions produce the most mistakes?
- Terms
- Note vs. mortgage or deed of trust
- Difference
- The note evidences the debt and repayment promise. The mortgage or deed of trust secures the obligation with real property.
- Question cue
- Promise to pay versus lien, foreclosure, release, or collateral.
- Terms
- Interest rate vs. APR
- Difference
- The interest rate prices interest on principal. APR is a standardized disclosure of credit cost under Regulation Z.
- Question cue
- Payment calculation versus comparison disclosure including defined finance charges.
- Terms
- Amortized vs. balloon vs. interest-only
- Difference
- Full amortization reaches zero by maturity, partial amortization leaves a balloon, and interest-only payments do not reduce principal during the interest-only period.
- Question cue
- Remaining balance, final large payment, or unchanged principal.
- Terms
- Fixed-rate vs. adjustable-rate mortgage
- Difference
- A fixed note rate does not periodically reset. An ARM rate can change according to its index, margin, adjustment period, and caps.
- Question cue
- Index movement, margin, initial period, periodic cap, or lifetime cap.
- Terms
- FHA insurance vs. VA guaranty
- Difference
- FHA insures qualifying mortgages. VA provides a guaranty for qualifying eligible borrowers.
- Question cue
- Do not say either agency ordinarily gives the borrower a free home or makes every loan directly.
- Terms
- Home equity loan vs. HELOC
- Difference
- A home equity loan is generally closed-end with a funded amount. A HELOC is open-end credit with a line and draw terms.
- Question cue
- Lump sum and amortization versus revolving draws and available credit.
- Terms
- Construction loan vs. bridge loan
- Difference
- Construction financing funds building costs, often through draws. A bridge loan supplies temporary financing across a timing gap.
- Question cue
- Inspections and draw schedule versus buying before sale proceeds arrive.
- Terms
- RESPA vs. TILA vs. ECOA
- Difference
- RESPA governs covered settlement and servicing practices, TILA addresses consumer credit disclosures and terms, and ECOA prohibits discrimination in credit.
- Question cue
- Referral fee, APR disclosure, or protected-basis credit decision.
- Terms
- Loan Estimate vs. Closing Disclosure
- Difference
- The Loan Estimate appears early after a covered application. The Closing Disclosure presents final loan and closing terms before consummation.
- Question cue
- Shopping and estimated terms versus final review before signing.
How should you solve a financing question?
- Identify the target: loan amount, ratio, payment, document, clause, program, disclosure, prohibited act, or lending stage.
- Separate the borrower, lender, loan originator, servicer, government agency, broker, and settlement-service provider.
- Identify the debt document and the security instrument independently.
- Classify the product by backing, rate structure, amortization, lien, purpose, and term.
- For math, list the base, percentage, period, and requested unit before using a calculator.
- For federal law, identify whether the core issue is settlement services, cost of credit, integrated disclosures, or equal credit opportunity.
- Check timing and trigger words, then select the answer that fits the exact transaction and stage.
- Target
- Loan-to-value ratio
- Relationship
- Loan amount ÷ value
- Check
- Use the value instructed by the stem
- Target
- Loan amount
- Relationship
- Value × LTV
- Check
- Convert percent to decimal
- Target
- Down payment
- Relationship
- Purchase price − loan amount
- Check
- Do not confuse with all cash due
- Target
- Discount points
- Relationship
- Loan amount × point percentage
- Check
- One point equals 1% of the loan amount
- Target
- Simple annual interest
- Relationship
- Principal × rate × time
- Check
- Use only when the question calls for simple interest
- Target
- Housing ratio
- Relationship
- Housing expense ÷ gross monthly income
- Check
- Use the included payment items stated
- Target
- Total debt ratio
- Relationship
- Housing plus recurring monthly debt ÷ gross monthly income
- Check
- Do not use net income unless instructed
How do the rules work in scenarios?
Calculating LTV
Scenario: A lender uses a $320,000 value and approves a $256,000 first mortgage.
- LTV equals loan amount divided by value.
- $256,000 divided by $320,000 equals 0.80.
- Convert the decimal to 80%.
Answer: The loan-to-value ratio is 80%.
Calculating discount points
Scenario: A borrower pays 1.5 discount points on a $240,000 loan.
- One point is 1% of the loan amount.
- 1.5 points is 0.015.
- $240,000 multiplied by 0.015 equals $3,600.
Answer: The discount points equal $3,600.
Spotting a RESPA referral problem
Scenario: A title company promises a broker $100 for every buyer sent to the company for a covered settlement service. No separate service is performed for the payment.
- The title service is a settlement service.
- A thing of value is tied to the referral.
- The payment is not for an actual separate service.
Answer: The arrangement points to a prohibited RESPA Section 8 referral fee.
Classifying a payment structure
Scenario: Monthly payments are calculated on a 30-year amortization schedule, but the entire remaining balance is due after 7 years.
- The payments reduce principal over a longer schedule.
- The maturity date arrives before full amortization.
- A balance remains due at maturity.
Answer: This is a partially amortized loan with a balloon payment.
What are the common exam traps?
- Trap
- The mortgage is the promise to repay.
- Correction
- The note contains the repayment promise; the mortgage or deed of trust secures it.
- Trap
- APR and note interest rate are identical.
- Correction
- APR is a defined disclosure measure and can reflect certain finance charges.
- Trap
- FHA and VA make every loan directly.
- Correction
- Approved private lenders generally make the loan; FHA insures and VA guarantees qualifying loans.
- Trap
- PMI and FHA mortgage insurance are the same program.
- Correction
- PMI is private mortgage insurance; FHA mortgage insurance is part of FHA-insured financing.
- Trap
- Prequalification is a guaranteed final approval.
- Correction
- Final approval depends on underwriting, documentation, property, conditions, and program requirements.
- Trap
- Every fee paid between real estate providers violates RESPA.
- Correction
- The issue is a covered thing of value for referral or an unearned split; bona fide payment for actual services can be different.
- Trap
- TRID uses one business-day definition for every timing rule.
- Correction
- The applicable definition depends on the specific provision. Read the question's trigger and document.
- Trap
- The broker decides whether the borrower receives credit.
- Correction
- The creditor or lender makes the credit decision. A broker must not promise approval.
Can you answer these original practice questions?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. Which document most directly contains the borrower's promise to repay principal and interest?
- Promissory note
- Mortgage release
- Closing Disclosure
- Appraisal report
Show answer and explanation
Answer: A
The note evidences the debt and repayment terms. The security instrument creates the property security interest.
2. A $270,000 loan is made on a $300,000 value. What is the LTV?
- 10%
- 30%
- 90%
- 111%
Show answer and explanation
Answer: C
$270,000 divided by $300,000 equals 0.90, or 90%.
3. Which federal law is most directly implicated when a settlement-service provider pays for referrals of covered mortgage business?
- RESPA
- ECOA
- ADA
- Sherman Act only
Show answer and explanation
Answer: A
RESPA Section 8 and Regulation X address kickbacks, referral fees, and unearned fee splits in covered settlement services.
4. Which loan has an interest rate that can change according to an index and margin, subject to its terms and caps?
- Fixed-rate mortgage
- Adjustable-rate mortgage
- Fully paid deed
- Mechanic's lien
Show answer and explanation
Answer: B
An ARM's future rate can adjust using the stated index and margin, limited by the loan's adjustment rules and caps.
5. For a covered TRID mortgage, which document is designed for final review before consummation?
- Loan Estimate
- Closing Disclosure
- Promissory-note advertisement
- Property-tax assessment appeal
Show answer and explanation
Answer: B
The Closing Disclosure presents final loan and closing terms and generally must be received at least three business days before consummation.
How should you study this area?
- Session
- 1. Documents and clauses
- Focus
- Note, mortgage, deed of trust, lien, acceleration, due-on-sale, and defeasance
- Proof you are ready
- Identify the document and triggered clause from a scenario.
- Session
- 2. Loan math
- Focus
- LTV, down payment, points, interest, PITI, and debt ratios
- Proof you are ready
- Set up each calculation with correct base, rate, and units.
- Session
- 3. Product structures
- Focus
- Fixed, ARM, amortized, balloon, interest-only, equity, construction, rehab, and bridge
- Proof you are ready
- Classify the product from its payment and purpose.
- Session
- 4. Government programs
- Focus
- FHA insurance, VA guaranty, and USDA eligibility framework
- Proof you are ready
- State who lends, who backs, and which eligibility layer matters.
- Session
- 5. Federal law
- Focus
- RESPA, TILA, TRID, ECOA, documents, triggers, and prohibited conduct
- Proof you are ready
- Map each fact pattern to the correct law and timing.
- Session
- 6. Lending timeline
- Focus
- Application, processing, underwriting, appraisal, approval, closing, and servicing
- Proof you are ready
- Place each event in order and identify the decision-maker.
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.
Financing: Illinois Broker Exam Study Guide FAQ
How much of the Illinois broker exam is Financing?
Financing is 10% of the national broker portion, or about 10 of the 100 scored national items. It covers calculations, underwriting, debt and security documents, loan types, federal programs, disclosures, and the lending process.
What is the difference between a promissory note and a mortgage?
The promissory note is the borrower's promise to repay the debt. The mortgage or deed of trust is the security instrument that gives the creditor a claim against the real property under its terms and governing law.
How do you calculate loan-to-value ratio?
LTV equals the loan amount divided by the applicable property value, expressed as a percentage. If a $240,000 loan is based on a $300,000 value, the LTV is 80%. Follow the question's instructions on which value to use.
What is the difference between interest rate and APR?
The interest rate is the rate used to calculate interest on the loan balance. APR is a disclosure measure reflecting the cost of credit under Regulation Z rules and can include certain finance charges. APR is not simply the note rate with a fee added.
What does PITI mean?
PITI means principal, interest, taxes, and insurance. A housing payment can also include mortgage insurance, association dues, or other obligations, depending on the question and actual loan.
What is the difference between FHA, VA, and USDA loans?
FHA insures qualifying loans made by approved lenders. VA guarantees part of qualifying loans for eligible borrowers. USDA Rural Development supports direct or guaranteed programs with borrower and property eligibility rules. None is a gift, and approval still depends on program and lender requirements.
What does RESPA prohibit?
RESPA and Regulation X address settlement practices, including a prohibition on giving or accepting a fee, kickback, or thing of value under an agreement for referrals of covered settlement-service business, and on splitting charges other than for services actually performed.
When are the Loan Estimate and Closing Disclosure due?
For a covered TRID transaction, the Loan Estimate is generally delivered or mailed no later than the third business day after the creditor receives an application. The consumer must receive the Closing Disclosure at least three business days before consummation, subject to the rule's details and exceptions.
What does ECOA protect?
ECOA and Regulation B prohibit credit discrimination on statutory protected bases, including race, color, religion, national origin, sex, marital status, age when the applicant can contract, receipt of public-assistance income, and good-faith exercise of rights under the Consumer Credit Protection Act.
Are these financing questions copied from the PSI exam?
No. Every practice question here is original and aligned to the published outline. It teaches the governing relationship without using confidential live questions.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- CFPB Regulation X, Real Estate Settlement Procedures Act
- CFPB Regulation Z, Truth in Lending Act
- CFPB Regulation B, Equal Credit Opportunity Act
- CFPB TILA-RESPA Integrated Disclosure FAQs
- HUD FHA loan information
- U.S. Department of Veterans Affairs Home Loan Buyer’s Guide
- USDA Rural Development Single Family Housing Guaranteed Loan Program
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.