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National Financing study guide

Financing for the Illinois real estate exam

A financing question may mention an appraisal, a monthly payment and a federal disclosure in the same paragraph. Start with what it asks you to find. Then separate the repayment promise, the property security, the product and the rule that controls the answer.

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What to study for financing

For the Illinois broker exam, learn five parts of financing: loan documents and clauses; payment and loan math; underwriting; loan types and risks; and federal lending rules. Classify the facts before calculating. A conventional loan can also be fixed-rate and fully amortized because those labels describe different features.

The PSI broker outline dated June 24, 2026 allocates 10% of the 100 scored national questions to Financing. This guide follows that whole area, not the Instructor allocation or a predicted number of questions on any one product. The examples are original teaching material, not PSI questions or a validated readiness test. Loan eligibility and transaction deadlines depend on the applicable rules and facts.

Read a financing question in this order

  1. Name the requested result: an amount, ratio, payment, document, product, clause, disclosure or prohibited act.
  2. Separate debt from security. The note states the principal and repayment terms, including interest, payments, maturity and default provisions. The mortgage or deed of trust supplies property security. A deed conveying ownership serves a different purpose.
  3. Classify each loan feature separately: backing, rate, amortization, term, purpose and lien position. A fixed rate does not freeze property taxes or insurance.
  4. For math, identify the base and units. Points use loan amount. Ratios use the stated qualifying income and counted expenses. Annual taxes and insurance need monthly conversion for PITI.
  5. Separate income, counted debts, credit history, assets and reserves, collateral and program eligibility. Prequalification and preapproval are not unconditional final approval. Processing, underwriting, closing, funding and servicing have different roles; no single sequence or ratio proves every loan is approved.
  6. For federal law, identify coverage before the trigger and deadline. RESPA settlement practices, TILA credit costs, TRID forms and ECOA credit discrimination address different questions.
  7. Check the risk at the next change: a rate reset, end of an interest-only period, balloon maturity, construction completion or sale of the old home. Refinancing is not guaranteed.
  8. For unfamiliar facts, explain why the closest alternative fails. Use a missed question to select the linked lesson instead of treating a memorized score as proof of readiness.
Choose the base before calculating
TargetRelationshipWhat to check
LTVLoan amount / applicable value x 100Use the stated base; purchase and refinance rules can differ
Loan amountApplicable value x LTV decimalCheck whether the task asks for the loan or the down payment
Down paymentPurchase price minus loan amountClosing costs and other cash requirements are separate
Points chargeLoan amount x points / 100A point is 1% of the loan amount, not a fixed rate reduction
Simple interestPrincipal x annual rate x time in yearsUse only for a stated simple-interest question
Narrow PITIMonthly principal + interest + property taxes + homeowners insuranceOther housing-expense definitions can add mortgage insurance or dues
Housing ratioCounted monthly housing expense / gross monthly qualifying income x 100Use all components and assumptions specified
Total debt ratioTotal counted monthly debt / gross monthly qualifying income x 100Do not count housing twice or invent one universal approval limit

Documents, products and rules to keep separate

real estate financing: key distinctions
DistinctionHow it worksWhat to notice
Note, security instrument and deedThe note states the repayment promise. A mortgage or deed of trust supplies property security under its terms and governing law. A deed conveys an ownership interest.Look for promise, collateral or ownership. The documents are not interchangeable.
Mortgagor and mortgageeIn a simple borrower-owner example, the mortgagor grants the mortgage and the mortgagee receives that security.Do not assume every owner who pledges property is also personally liable on a note.
Acceleration, due-on-sale and releaseAcceleration makes the balance due under the applicable default terms. A due-on-sale clause gives a lender an option concerning a transfer, subject to statutory protections. Full payment and formal release or record clearance are different issues.Read required default notices and cure terms. Do not assume every transfer permits acceleration or that a loan assumption always releases the original obligor.
Conventional and conformingConventional financing lacks the relevant federal mortgage insurance or guaranty. Conforming financing must also meet the applicable enterprise standards.A dollar limit is only one conforming requirement. Conventional does not always mean 20% down; qualifying loans can require PMI.
Amortization and maturityFull amortization repays principal by the end of the schedule. A shorter maturity can leave a balloon. Paying only accrued interest leaves principal unpaid; unpaid interest added to principal creates negative amortization.Identify the balance remaining when the debt actually becomes due.
Fixed rate and ARMA fixed note rate stays fixed. An ARM can reset using its index and margin, subject to the applicable caps, floors and adjustment terms.Index plus margin is the uncapped calculation, not always the permitted next rate.
FHA, VA and USDAFHA insures qualifying lender-made loans. VA-backed lending uses a guaranty, with separate direct-loan programs. USDA also has distinct guaranteed and Direct programs.Identify who lends, who insures or guarantees, and the particular borrower and property conditions. A certificate of eligibility is not final loan approval.
PMI and other housing insurancePMI protects the lender against the covered borrower-default risk. Homeowners insurance concerns insured property risks. FHA mortgage insurance follows its own program rules.Borrower-paid conventional PMI, lender-paid coverage, FHA MIP, VA funding fees and USDA guarantee fees have different rules. No one cancellation percentage applies to all of them.
Home equity loan and HELOCA home equity loan is generally closed-end, with a funded amount. A HELOC is open-end, with borrowing during its available draw period and later repayment terms.A credit limit is not an unlimited permanent right to draw; a line can be restricted under the applicable rules.
Construction, rehabilitation and bridge financingConstruction financing often advances funds as work progresses. Rehabilitation financing funds qualifying repairs or improvements; FHA section 203(k) is a mortgage-insurance program for qualifying rehabilitation or purchase and rehabilitation. Bridge financing covers a temporary funding gap.A product purpose does not promise permanent financing, timely sale proceeds or automatic conversion. Program limits and qualification need current program-specific checks.
Reverse mortgage and free moneyA HECM is a loan for eligible homeowners, generally age 62 or older. Borrowers retain ownership and must meet tax, insurance, occupancy and maintenance obligations; interest and fees can grow the debt.The absence of ordinary monthly mortgage payments does not erase those obligations or all repayment events.
Seller financing and an exemptionSeller financing identifies who extends credit. Installment land contracts and seller-held notes can have different ownership and security structures.A qualified exclusion from a Regulation Z loan-originator definition is not an exemption from every lending duty, licensing requirement or Illinois installment-contract protection.
Note rate, APR and total costsThe note rate calculates interest. APR expresses the defined yearly cost of credit, including applicable finance charges. Not every closing charge is a finance charge.Do not calculate APR by simply adding a fee percentage to the note rate.
Loan Estimate and Closing DisclosureThe estimate supports early review of a covered loan. The Closing Disclosure gives final terms before consummation. Receiving either form is not an unconditional approval.Check the application trigger, delivery standard and applicable business-day definition.
Origination, servicing and secondary marketsOrigination creates the borrower's loan. Servicing administers it. Later loan sales and securitization support the secondary market; Fannie Mae does not originate consumer mortgages directly.A loan sale does not by itself describe a new loan or an ownership deed transfer.
PMI cancellation and scheduled terminationFor an eligible HPA-covered borrower-paid loan, requested cancellation at 80% of original value requires a written request and all applicable conditions. The scheduled 78% termination rule is different and requires the borrower to be current.Do not replace scheduled balance with a fresh market value, or apply the rules to every loan or insurance program.
Settlement referrals and cooperative brokerageRESPA has a defined exception for real estate brokerage fee divisions when all parties act in that capacity. That exception does not extend to mortgage-broker fee arrangements.Identify the parties' actual capacities and the particular permitted compensation, not just a referral label.
Credit discrimination and lawful underwritingECOA protects against discrimination on statutory bases. Creditworthiness can still be evaluated under lawful requirements; source-based retirement-income exclusion is different from an individualized assessment.The current Regulation B text rejects an effects test under ECOA but still addresses prohibited-basis treatment and intentional proxies. Other laws remain separate.
Prepayment charge and balloon balanceA prepayment charge concerns paying early under the applicable terms and law. A balloon is the unpaid balance due at maturity.Neither is present in every loan. Covered Regulation Z prepayment penalties have strict permission and limit rules; a contract label alone is insufficient.

Financing examples with the reasoning shown

Calculating LTV

A lender uses a $320,000 value and approves a $256,000 first mortgage.

  1. LTV equals loan amount divided by value.
  2. $256,000 divided by $320,000 equals 0.80.
  3. Convert the decimal to 80%.

Answer: The loan-to-value ratio is 80%.

Calculating discount points

A borrower pays 1.5 discount points on a $240,000 loan.

  1. One point is 1% of the loan amount.
  2. 1.5 points is 0.015.
  3. $240,000 multiplied by 0.015 equals $3,600.

Answer: The discount points equal $3,600.

Spotting a RESPA referral problem

For a federally related mortgage loan subject to RESPA section 8, a title company promises a broker $100 per buyer referred. No lawful exception applies and no separate service is performed for the payment.

  1. The covered settlement-service referral and thing of value are linked by an agreement.
  2. Both giving and accepting a prohibited referral payment matter.
  3. A small amount or absence of a higher consumer charge does not create an exception.

Answer: The arrangement violates the stated RESPA section 8 referral-payment prohibition.

Classifying a payment structure

Monthly payments are calculated on a 30-year amortization schedule, but the entire remaining balance is due after 7 years.

  1. The payments reduce principal over a longer schedule.
  2. The maturity date arrives before full amortization.
  3. A balance remains due at maturity.

Answer: This is a partially amortized loan with a balloon payment.

Keep narrow PITI separate from the broader total

Monthly principal and interest is $1,850. Annual property tax is $7,200, annual homeowners insurance is $1,440 and monthly association dues are $200. Find narrow PITI, then the total including dues.

  1. Tax is $600 per month; insurance is $120 per month.
  2. Narrow PITI is $1,850 + $600 + $120 = $2,570.
  3. Adding $200 dues gives $2,770. A qualifying housing-expense calculation can include further required items.

Answer: Narrow PITI is $2,570; the stated total including dues is $2,770 per month.

Use the stated debt-ratio inputs

The problem gives $8,000 gross monthly qualifying income, $2,400 counted housing expense and $800 other counted monthly debt.

  1. Housing ratio is $2,400 / $8,000 = 30%.
  2. Total counted debt is $3,200, so total debt ratio is 40%.
  3. Neither number supplies the rest of the underwriting or a universal approval decision.

Answer: The supplied housing and total-debt ratios are 30% and 40%.

Apply the ARM cap after index plus margin

A hypothetical ARM has a 5% current rate, a 6% index and a 2.5% margin. At this reset, a two-percentage-point increase cap applies. Assume no other cap, floor or carryover changes the result.

  1. The fully indexed rate is 8.5%.
  2. The stated cap allows at most 5% + 2 percentage points = 7% at this adjustment.
  3. The permitted next rate is therefore below the uncapped result.

Answer: The next rate is 7% under the supplied terms.

Read the purchase-loan value base

For a standard Fannie Mae purchase first mortgage, the price is $300,000 and current appraisal is $280,000. Assume the general lower-of rule applies with no special exception. Find the loan at 80% LTV.

  1. The base is the lower figure, $280,000.
  2. $280,000 x 0.80 = $224,000.
  3. The price-minus-loan gap is $76,000, before other cash requirements. This is not a promise that the lender will approve the loan.

Answer: The loan is $224,000; the price-minus-loan gap is $76,000.

Separate an 80% request from a 78% schedule

Assume an ordinary eligible HPA-covered borrower-paid PMI loan, outside the high-risk exceptions. Original value is $300,000. Compare an 80% cancellation request with the scheduled 78% termination threshold; the borrower is current.

  1. 80% of original value is $240,000. That is not an automatic cancellation: a written request and all applicable payment-history, value and subordinate-lien conditions still matter.
  2. 78% of original value is $234,000. The ordinary automatic rule uses the scheduled date and current-payment requirement, not any claim that today's market value is higher.
  3. FHA MIP and lender-paid mortgage insurance are governed differently.

Answer: The two thresholds are $240,000 and $234,000, with different conditions; the numbers alone do not establish cancellation.

Count a stipulated rescission period from the last event

For a covered, nonexempt closed-end rescindable transaction, consummation is Monday, October 19, 2026. The required rescission notice and all material disclosures are received Tuesday, October 20. Assume no holiday, emergency waiver or other fact changes the ordinary rule.

  1. Use the latest of consummation, receipt of the required notice and receipt of all material disclosures: Tuesday, October 20.
  2. The next three specific business days are Wednesday 21, Thursday 22 and Friday 23.
  3. The ordinary period ends at midnight on the third day. This is not the pre-consummation Closing Disclosure waiting period, and it does not create a rescission right for an exempt acquisition transaction.

Answer: Under the supplied facts, the period ends at midnight Friday, October 23, 2026.

Answers that sound right but miss a condition

  • A preapproval is unconditional final credit approval. Final lending still depends on the applicable documents, property, conditions and underwriting.
  • The lowest note rate always means the least expensive loan. Points, other costs, loan term and how long the loan is held matter. APR is useful but is not a complete personal-cost forecast.
  • An ARM always resets to index plus margin without limits. Check the actual adjustment date, applicable caps, floors and other stated terms.
  • A balloon can always be refinanced. Future credit, income, property value, rates and available products can change.
  • Three business days means the same thing in every rule. General and specific business-day definitions, receipt standards and triggering events differ.
  • Every mortgage has a three-day cancellation right. Regulation Z rescission has coverage and exemptions. A Closing Disclosure waiting period is not the same right.
  • A real estate license automatically authorizes every mortgage activity. Lending, loan-originator licensing and transaction advice have their own applicable requirements. Do not promise a lender decision.
  • Every closing fee belongs in APR. Finance-charge definitions and exclusions matter. A charge can be a closing cost without entering the APR calculation.
  • Paying points guarantees one fixed rate reduction. Points measure a loan-based charge. The quoted reduction depends on the actual offer.
  • A neutral-sounding credit rule can never discriminate. The current Regulation B text still addresses intentional protected-characteristic proxies, and other applicable laws require separate analysis.
  • The latest announcement replaces every loan document. Check legal effect, implementation, eligibility and the applicable loan dates. A conditional direction is not proof of a live program.

Try the financing questions

These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.

1. Which document contains the borrower's repayment promise?

  1. Mortgage release
  2. Closing Disclosure
  3. Ownership deed
  4. Promissory note
Show answer and explanation

Answer: D. Promissory note

The note states the debt and repayment terms. The mortgage or deed of trust supplies security; the Closing Disclosure discloses terms rather than replacing that promise. A deed serves a different ownership purpose.

2. A $270,000 loan uses the supplied $300,000 value base. What is the LTV?

  1. 90%
  2. 111%
  3. 10%
  4. 30%
Show answer and explanation

Answer: A. 90%

$270,000 / $300,000 x 100 = 90%. Subtracting or reversing the inputs answers a different question. No underwriting approval follows from the ratio alone.

3. For covered settlement business, a provider pays a broker for referrals under an agreement. No lawful exception applies. Which framework directly addresses it?

  1. A zoning ordinance
  2. The deed recording system
  3. ECOA only
  4. RESPA section 8 and Regulation X
Show answer and explanation

Answer: D. RESPA section 8 and Regulation X

The stated covered business, agreement, referral and thing of value invoke RESPA section 8. The prohibition reaches giving and accepting the payment. The other choices do not supply this settlement-referral rule.

4. Which mortgage can reset its rate using an index and margin under its adjustment terms?

  1. An adjustable-rate mortgage
  2. A fixed-rate loan solely because taxes rise
  3. An ownership deed
  4. A paid release
Show answer and explanation

Answer: A. An adjustable-rate mortgage

An ARM can adjust under its rate formula and applicable limits. A change in taxes does not change a fixed note rate, and a release or deed is not a rate-reset product.

5. Which form gives final covered TRID loan and closing terms before consummation?

  1. Servicing coupon
  2. Loan Estimate only
  3. Appraisal report
  4. Closing Disclosure
Show answer and explanation

Answer: D. Closing Disclosure

The Closing Disclosure is the final covered TRID disclosure. The consumer generally must receive it at least three specific business days before consummation, subject to the rule. The other documents have different purposes.

6. What does one discount point mean?

  1. A guaranteed one-percentage-point rate reduction
  2. One dollar per payment
  3. 1% of the loan amount
  4. 1% of the house price in every loan
Show answer and explanation

Answer: C. 1% of the loan amount

One point costs 1% of the loan amount. The interest-rate reduction available for points depends on the offer; there is no fixed one-for-one rate reduction.

7. A fixed-rate loan has level principal-and-interest payments. Which amount can still change?

  1. The original signed maturity whenever insurance rises
  2. The total housing payment when taxes or insurance change
  3. The fixed note rate merely because taxes rise
  4. The original principal every tax year
Show answer and explanation

Answer: B. The total housing payment when taxes or insurance change

A level principal-and-interest payment does not freeze escrowed taxes, insurance or other housing costs. The fixed rate and signed terms do not automatically change with those expenses.

8. Monthly principal and interest is $1,600, annual taxes $6,000 and annual homeowners insurance $1,200. With no other included items, what is narrow PITI?

  1. $2,100
  2. $1,700
  3. $2,200
  4. $8,800
Show answer and explanation

Answer: C. $2,200

Monthly taxes are $500 and insurance is $100. Thus $1,600 + $500 + $100 = $2,200. Annual amounts must be converted before adding them to a monthly payment.

9. A loan uses 30-year amortizing payments but the unpaid balance is due after seven years. Which description fits?

  1. Interest-free grant
  2. Partially amortized loan with a balloon
  3. Fully paid at year seven solely because payments were monthly
  4. Open-end credit with no maturity
Show answer and explanation

Answer: B. Partially amortized loan with a balloon

The shorter maturity arrives before the amortization schedule ends, leaving a balance due. Monthly payments do not prove full payoff. Refinancing that balloon is not guaranteed.

10. A payment covers all accrued interest but no principal during an interest-only period. What happens to principal from that payment alone?

  1. It becomes government-owned
  2. It doubles automatically
  3. It is fully repaid
  4. It remains unpaid
Show answer and explanation

Answer: D. It remains unpaid

An interest-only payment does not reduce principal. This differs from negative amortization, where unpaid interest is added to the balance. Later repayment follows the loan terms.

11. Which statement about conventional financing is correct?

  1. It is always FHA-insured
  2. It always requires exactly 20% down
  3. It is always approved below a dollar limit
  4. It is not automatically conforming or subject to one universal down-payment percentage
Show answer and explanation

Answer: D. It is not automatically conforming or subject to one universal down-payment percentage

Conventional and conforming describe different features. Applicable enterprise standards extend beyond a loan limit, and available conventional programs do not all require 20% down. FHA insurance belongs to a different category.

12. In an ordinary FHA-insured lender-made mortgage, what does FHA supply?

  1. A deed to the house
  2. A guarantee of future market value
  3. Automatic approval of the applicant
  4. Mortgage insurance under its program
Show answer and explanation

Answer: D. Mortgage insurance under its program

FHA insurance supports qualifying lender-made loans. It does not replace borrower and property requirements, transfer ownership to FHA or guarantee resale value.

13. Which comparison correctly identifies the named VA and USDA program roles?

  1. Neither program has borrower requirements
  2. VA-backed loans use a guaranty; USDA has separate guaranteed and Direct programs
  3. All VA and USDA lending is always direct
  4. A guaranty makes a loan a gift
Show answer and explanation

Answer: B. VA-backed loans use a guaranty; USDA has separate guaranteed and Direct programs

The program and lender roles differ. VA also has separate direct-loan programs. Eligibility, property requirements and underwriting still matter; a guaranty is not debt forgiveness.

14. What risk does private mortgage insurance principally protect against?

  1. The lender's covered loss from borrower default
  2. A guaranteed borrower investment profit
  3. Every tax increase
  4. All borrower repair expenses
Show answer and explanation

Answer: A. The lender's covered loss from borrower default

PMI protects the lender, although the borrower may pay its cost. It is not homeowners insurance or a promise to pay every borrower obligation, and it does not erase the debt.

15. Which product is an open-end home-equity credit line?

  1. A closed-end loan simply because it is secured
  2. HELOC
  3. A fully paid deed
  4. A title policy
Show answer and explanation

Answer: B. HELOC

A HELOC permits draws subject to its available line, draw-period terms and lawful restrictions. It is not unlimited permanent borrowing. The other choices do not identify that open-end structure.

16. Which obligation ordinarily remains under the stated HECM reverse mortgage?

  1. No taxes ever remain due
  2. The homeowner must meet applicable tax, insurance, occupancy and maintenance requirements
  3. The lender must pay all maintenance forever
  4. The borrower has received a gift
Show answer and explanation

Answer: B. The homeowner must meet applicable tax, insurance, occupancy and maintenance requirements

A HECM remains a loan. The homeowner retains ownership subject to the security and must meet those obligations; interest and fees can grow the debt. Other repayment triggers remain relevant.

17. A construction loan funds advances as work progresses. What can be concluded about permanent financing?

  1. Conversion depends on the terms and applicable approval requirements
  2. The debt can never mature
  3. Every construction loan converts automatically
  4. The lender guarantees the finished value
Show answer and explanation

Answer: A. Conversion depends on the terms and applicable approval requirements

Staged construction advances do not promise permanent financing. Conversion may require a new application or separate arrangement. Read the actual commitment instead of assuming the next loan exists.

18. A covered TRID applicant supplies all six application items. The creditor requests a seventh document. What happens to the initial Loan Estimate trigger?

  1. It disappears
  2. It starts only after a full appraisal
  3. It is not postponed merely by demanding the additional item
  4. It always waits for final approval
Show answer and explanation

Answer: C. It is not postponed merely by demanding the additional item

The covered six-item application definition controls the trigger. Additional information can be sought for underwriting without rewriting that definition. An appraisal report is different from the estimated property value used in the application.

19. A covered loan finances acquisition of the consumer's principal dwelling. Is there automatically a Regulation Z three-day rescission right?

  1. Yes; every mortgage has it
  2. Only if the broker promises it
  3. Yes; the Closing Disclosure creates it
  4. No; the defined residential mortgage transaction is an exemption
Show answer and explanation

Answer: D. No; the defined residential mortgage transaction is an exemption

The defined acquisition residential mortgage transaction is exempt from the ordinary Regulation Z rescission right. Coverage and exceptions matter; the pre-consummation Closing Disclosure review period is a separate rule. Other rights require separate analysis.

20. A creditor excludes an applicant's retirement income solely because it is retirement income. Which statement is correct?

  1. Retirees are excluded from ECOA
  2. Every retirement-income dollar must be accepted without review
  3. The lender may always use the source as the rejection reason
  4. Regulation B prohibits that categorical exclusion; amount and probable continuance may be assessed lawfully
Show answer and explanation

Answer: D. Regulation B prohibits that categorical exclusion; amount and probable continuance may be assessed lawfully

Regulation B does not permit discounting or excluding retirement income merely for that source. An individualized lawful evaluation of amount and probable continuance is different. It does not require unconditional approval or forbid every permitted age-related credit consideration.

21. A covered closed-end credit advertisement states a required 10% down payment. Under Regulation Z, what follows?

  1. The advertisement needs no other credit disclosures
  2. APR is replaced by the appraisal
  3. The advertiser has approved every borrower
  4. The stated percentage is a triggering term, so the applicable additional disclosures are required
Show answer and explanation

Answer: D. The stated percentage is a triggering term, so the applicable additional disclosures are required

A stated down-payment percentage is a triggering term. The advertisement must give the required down-payment information, repayment terms over the full term and APR, including whether the APR may increase after consummation. An advertisement must still offer actually available terms. The fact does not approve borrowers or replace APR.

22. An ARM is at 5%. The index is 6% and margin 2.5%. A two-percentage-point increase cap applies at this reset, with no other relevant limit or carryover. What is the next rate?

  1. 7%
  2. 5%
  3. 2%
  4. 8.5%
Show answer and explanation

Answer: A. 7%

Index plus margin gives 8.5%, but the stated adjustment cap limits the increase to two percentage points above 5%, or 7%. This applies the supplied terms, not a universal ARM formula ignoring caps or floors.

23. A standard Fannie Mae purchase first mortgage uses the general lower-of-price-or-appraisal rule, without a special exception. Price is $300,000 and appraisal $280,000. What is an 80% LTV loan?

  1. $76,000
  2. $224,000
  3. $280,000
  4. $240,000
Show answer and explanation

Answer: B. $224,000

The applicable base is $280,000. Multiplying by 0.80 gives $224,000. The $76,000 figure is the price-minus-loan gap before other costs, not the loan. Other programs or transaction types can use different rules.

24. For the ordinary eligible HPA-covered borrower-paid PMI loan described, which distinction is correct?

  1. Lender-paid coverage always follows the same cancellation request
  2. 80% requested cancellation has a written-request and eligibility process; the scheduled 78% termination rule is different and requires current payments
  3. Any current market value above the balance cancels every type of insurance
  4. FHA MIP always ends at 80%
Show answer and explanation

Answer: B. 80% requested cancellation has a written-request and eligibility process; the scheduled 78% termination rule is different and requires current payments

The HPA rules distinguish requested cancellation from scheduled automatic termination. Original value, eligibility, payment history and other applicable conditions matter. Lender-paid coverage and FHA MIP are not automatically governed by this ordinary borrower-paid PMI rule.

25. Which arrangement fits the stated RESPA cooperative brokerage exception?

  1. Any mortgage broker paying any real estate broker for a loan referral
  2. Any arrangement described as marketing
  3. A real estate brokerage fee division when all participants act in real estate brokerage capacities
  4. Every title-company referral payment
Show answer and explanation

Answer: C. A real estate brokerage fee division when all participants act in real estate brokerage capacities

The exception is limited to real estate brokerage capacities. It does not extend to mortgage-broker fee arrangements merely because a participant also has a real estate license. Other lawful compensation provisions have their own conditions; labels alone do not establish them.

26. Which statement best describes the current Regulation B evaluation rule as of October 2026?

  1. Every facially neutral criterion is lawful under every law
  2. A creditor may use intentional proxies for protected characteristics
  3. The current rule rejects an effects test under ECOA, while prohibited-basis treatment and intentionally discriminatory proxies remain addressed
  4. ECOA no longer prohibits discrimination
Show answer and explanation

Answer: C. The current rule rejects an effects test under ECOA, while prohibited-basis treatment and intentionally discriminatory proxies remain addressed

This describes the CFPB's current Regulation B text after the July 21, 2026 amendments. It is not a statement that every court or every other law removes disparate-impact liability. A neutral label does not protect an intentionally discriminatory proxy.

27. In a covered, nonexempt closed-end rescindable transaction, consummation is Monday, October 19, 2026 and the required notice plus all material disclosures arrive Tuesday, October 20. Assume no holiday or waiver. When does the ordinary period end?

  1. At noon Tuesday
  2. Immediately on Monday
  3. Three calendar months after application
  4. Midnight Friday, October 23
Show answer and explanation

Answer: D. Midnight Friday, October 23

The latest required event is Tuesday, October 20. Count Wednesday, Thursday and Friday as the next three specific business days; the period ends at midnight Friday. A covered acquisition residential mortgage transaction is exempt, so this example expressly assumes nonexempt rescindable credit.

28. What can be concluded from the October 22, 2026 housing executive order alone?

  1. It directs conditional agency actions; it does not establish that every directed pilot is already operational
  2. Every purchase no longer needs title insurance
  3. All existing PMI automatically ended that day
  4. Every conventional borrower immediately received a new rate
Show answer and explanation

Answer: A. It directs conditional agency actions; it does not establish that every directed pilot is already operational

The order directs an FHFA pilot with stated conditions and mortgage timing tied to establishment. Other sections have their own limits, including eligible refinancing and agency direct lending. The order alone does not prove a launch date, abolish every insurance requirement or set all private mortgage rates.

Common questions

How much of the Illinois broker exam is financing?

The June 24, 2026 PSI broker outline assigns 10% of the 100 scored national questions to the whole Financing area. It includes terminology, loan types and federal lending. It does not assign a separate quota to every product on this page.

What should I learn first?

Start with documents and clauses, then loan math and underwriting. Compare each loan's backing, rate, amortization and purpose. Finish with RESPA, TILA, TRID and ECOA. An early prequalification, Loan Estimate, appraisal or Closing Disclosure is not unconditional final approval. For covered first-lien dwelling credit, Regulation B also gives applicants rights to copies of written valuations; an appraisal is not a home inspection.

Are the mortgage and promissory note the same?

No. The note states the repayment promise. The mortgage or deed of trust supplies property security under its terms and governing law. The deed conveying ownership is another document.

How do I calculate LTV and points?

LTV is loan amount divided by the applicable value base, multiplied by 100. Points are loan amount multiplied by points divided by 100. Read the supplied value base and rounding instruction; do not use the purchase price for every transaction.

Does PITI include every housing expense?

Narrow PITI means principal, interest, property taxes and homeowners insurance. Mortgage insurance, association dues or other obligations can enter a broader qualifying housing expense. Use the definition and included items the question supplies.

Is APR the same as the interest rate?

No. APR expresses a defined yearly cost of credit and includes applicable finance charges. Not every closing charge enters that calculation. A fee cannot simply be added to the note rate to compute APR.

Is there one passing debt ratio for all mortgages?

No. Program rules, automated or manual underwriting, the counted obligations and other requirements vary. A supplied ratio calculation is an arithmetic exercise, not an approval decision.

Does every conventional loan require 20% down?

No. Conventional programs can permit smaller down payments subject to their conditions. Mortgage insurance may be required. Conventional, conforming and a particular down-payment percentage are not interchangeable labels.

Are FHA, VA and USDA all direct loans?

No. Ordinary FHA-insured loans are made by approved lenders. VA-backed loans use a guaranty, while VA also has direct programs. USDA guaranteed and Direct lending are distinct. Identify the particular program before assigning roles or requirements.

Is an interest-only loan the same as negative amortization?

No. Paying all accrued interest can leave principal unchanged during an interest-only period. Adding unpaid interest to principal makes the balance grow. The later payment and maturity terms determine what must be repaid.

Can a seller-financed purchase avoid all lending law?

No. The structure, transaction and qualified exemptions matter. The one-property and three-property seller-financer exclusions in Regulation Z have different conditions and do not erase every other requirement. Illinois installment contracts also require separate state-law analysis.

What does RESPA section 8 prohibit?

For covered business, section 8 prohibits giving or accepting a thing of value under an agreement for settlement-service referrals, subject to the applicable lawful exceptions. Unearned fee splitting is another issue. Bona fide actual-service compensation and the narrow cooperative real estate brokerage exception require their own conditions; a marketing label or unchanged consumer price does not excuse a prohibited referral payment.

When do the Loan Estimate and Closing Disclosure arrive?

For a covered TRID application, the initial Loan Estimate generally must be delivered or mailed within three general business days after receipt of the application. A separate seven-specific-business-day pre-consummation rule also applies. The consumer generally must receive the Closing Disclosure at least three specific business days before consummation, subject to the rule and its exceptions.

The six application items are name, income, Social Security number to obtain a credit report, property address, estimated property value and mortgage amount sought. Merely requiring a seventh item does not postpone that trigger. General business days concern when the creditor is open for substantially all business functions; the specific definition generally counts every day except Sundays and federal legal public holidays. Coverage, receipt presumptions and exceptions still matter.

An inaccurate APR under the applicable accuracy rules, a loan-product change or a newly added prepayment penalty can require a corrected Closing Disclosure and a new three-specific-business-day wait. Not every corrected number restarts it.

What changed in ECOA guidance during 2026?

The CFPB final rule effective July 21, 2026 amended Regulation B on disparate impact, discouragement and special purpose credit programs. Its current rule states that ECOA does not provide an effects test, while prohibited-basis disparate treatment and the revised discouragement prohibition remain. Do not treat that agency rule as the repeal of other fair-housing or state protections.

Protected bases include race, color, religion, national origin, sex, marital status, age when the applicant can contract, public-assistance income and good-faith exercise of Consumer Credit Protection Act rights. The current discouragement rule addresses statements the creditor knows or should know would cause a reasonable person to believe credit would be denied or offered on less favorable terms because of a prohibited characteristic. Do not substitute a bare negative impression or treat targeted encouragement alone as discouraging everyone else.

Does a high practice score prove I will pass?

No. These original questions are not calibrated to PSI difficulty or a validated readiness cutoff. Review wrong answers and uncertain correct answers, then try unfamiliar scenarios rather than relying on a memorized score.

Can Pass Illinois replace approved pre-license education?

No. The optional app is exam preparation. Property Ownership practice is free; full access is paid. Approved education and other licensing requirements remain separate.

When can PMI be removed?

For eligible HPA-covered borrower-paid PMI, the ordinary 80%-of-original-value cancellation route requires a written request and all applicable conditions, including payment history and required evidence about value and subordinate liens. The ordinary 78% rule uses the scheduled balance and requires current payments; a separate midpoint rule also matters. High-risk and other exceptions, lender-paid coverage and program-specific insurance need separate analysis. FHA MIP does not automatically follow this framework.

What mortgage advertising details trigger more disclosures?

For covered closed-end advertising, stated down-payment amounts or percentages, payment amounts, numbers of payments or repayment periods, and finance-charge amounts are triggering terms. Required additional information includes the down payment, full repayment terms and APR, including whether it may increase. A rate alone is not that triggering-term list, but rates and all advertisements still have their own rules. Do not extend these closed-end examples to every HELOC advertisement.

Does a due-on-sale clause apply to every ownership transfer?

No. A due-on-sale clause operates under its terms and governing law. Federal law protects specified transfers involving qualifying residential property, subject to their conditions. An assumption, a lender's transfer approval and a release of the original obligor are different issues. Do not promise an acceleration outcome from the word transfer alone.

How do construction, rehabilitation and bridge loans differ?

Construction financing often funds work through advances. Rehabilitation financing funds qualifying repairs; FHA section 203(k) is a mortgage-insurance program for qualifying rehabilitation or purchase and rehabilitation. A bridge loan supplies temporary funding across a gap, such as a purchase before sale proceeds arrive. None guarantees that the existing home will sell or that permanent refinancing will be approved.

What is the primary versus secondary mortgage market?

The primary market originates the borrower's loan. Later sales and securitization occur in the secondary market and help supply funding. Fannie Mae purchases qualifying loans rather than originating mortgages to consumers directly. Ownership of the loan, servicing responsibility and the homeowner's title are distinct.

Did the October 22, 2026 housing order change every loan immediately?

No. It directs conditional agency actions. Its FHFA pilot concerns qualifying mortgages made after establishment and retains other stated requirements. It does not alone prove an operational launch date or automatic cancellation for existing PMI. Separate provisions concern eligible refinancing and agency direct lending, not every purchase loan or every federally guaranteed lender-made mortgage.

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Official sources and scope

Reviewed October 28, 2026. References identify the outline, provisions and program descriptions used here. The review date is not a new effective date for every rule. Earlier actual primary readings are reused within their recorded scope. Program announcements and proposed changes are distinguished from operational requirements; no private loan is approved by these examples.

This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.

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