NMLS SAFE Practice Test

NMLS SAFE Mortgage Programs Practice Questions

Mortgage Programs makes up 5 of every 50 questions on a Tigertest NMLS SAFE practice test. Here are 10 of the 20 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on the NMLS SAFE MLO content outline. Original questions; 50 per test, weighted like the real 120-question test, 75% to pass. Not affiliated with NMLS.

1. 1. A conventional loan whose amount is above the conforming loan limit set by FHFA is called a:

   • A.Portfolio swap
   • B.Jumbo loan
   • C.Government loan
   • D.Conforming loan

   Answer: B. Loans above the conforming limit cannot be bought by Fannie Mae or Freddie Mac and are called jumbo (nonconforming) loans, often kept in portfolio or sold to private investors.

2. 2. Which entity guarantees securities backed by FHA and VA loans?

   • A.Freddie Mac
   • B.The Federal Reserve
   • C.Fannie Mae
   • D.Ginnie Mae

   Answer: D. Ginnie Mae, part of HUD, guarantees timely payment on mortgage-backed securities made up of government loans such as FHA, VA and USDA. Fannie Mae and Freddie Mac buy conventional conforming loans.

3. 3. A conventional borrower puts 10% down on a home. The lender will usually require:

   • A.Private mortgage insurance
   • B.A USDA guarantee fee
   • C.An FHA mortgage insurance premium
   • D.A VA funding fee

   Answer: A. Conventional loans with a loan-to-value above 80% normally carry private mortgage insurance. MIP, the funding fee and the guarantee fee belong to FHA, VA and USDA loans.

4. 4. Which statement about FHA mortgage insurance is correct?

   • A.It is paid only by the seller
   • B.It applies only to jumbo loans
   • C.It has upfront and annual premiums
   • D.It ends at 78% of the original value

   Answer: C. FHA loans carry an upfront MIP, which may be financed, and an annual MIP paid monthly. The automatic 78% cancellation under the Homeowners Protection Act applies to conventional PMI, not FHA.

5. 5. An FHA borrower with a credit score of 640 buys a home. The minimum required investment is:

   • A.10%
   • B.5%
   • C.3.5%
   • D.0%

   Answer: C. FHA requires at least 3.5% down for scores of 580 and above, and 10% for scores from 500 to 579. VA and USDA loans can have no down payment.

6. 6. Who insures FHA loans?

   • A.HUD, through the FHA
   • B.The Department of Agriculture
   • C.Private mortgage insurers
   • D.The Department of Veterans Affairs

   Answer: A. The Federal Housing Administration is part of HUD and insures the lender against loss on FHA loans, paid for by the borrower's mortgage insurance premiums.

7. 7. Which document shows a veteran's eligibility for a VA-guaranteed loan?

   • A.Statement of Service letter
   • B.DD-214 discharge waiver
   • C.VA residual income sheet
   • D.Certificate of Eligibility

   Answer: D. The Certificate of Eligibility confirms the veteran's entitlement. A DD-214 or statement of service is evidence used to obtain the certificate, not the eligibility document itself.

8. 8. Which feature is typical of a VA-guaranteed purchase loan?

   • A.Use only for investment property
   • B.No monthly mortgage insurance
   • C.A required 5% down payment
   • D.A maximum 15-year term

   Answer: B. VA loans carry no monthly mortgage insurance and often no down payment. Most borrowers pay a one-time funding fee instead, and the home must be the veteran's occupied residence.

9. 9. Besides the debt-to-income ratio, VA underwriting looks at:

   • A.Housing ratio only
   • B.Residual income
   • C.Net worth over five years
   • D.The seller's credit score

   Answer: B. VA uses residual income, the money left each month after major expenses, varying by family size and region, along with the debt-to-income ratio.

10. 10. A USDA guaranteed housing loan is designed for:

    • A.Investors buying rental homes
    • B.Buyers of high-priced urban condos
    • C.Veterans buying in any location
    • D.Moderate-income rural buyers

    Answer: D. USDA Rural Development guaranteed loans serve low- and moderate-income buyers in eligible rural areas, with income limits and often no down payment.