Practice Florida mortgage rules with 10 free questions on notes, FHA and VA loans, PMI, ARMs, and foreclosure. Get a score, clear explanations, and the reason each wrong choice fails. No account needed.
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10 practice questions on residential mortgages, scored, each with a full explanation after you answer. Every question is also written out below if you would rather study at your own pace.
All 10 questions and explanations are free. Residential Mortgages carries 9% of the published outline, about 9 questions. This small practice set does not predict your state-exam score.
01 / Know what each document does
Start here before studying a loan program or a foreclosure. These distinctions explain why a new owner does not automatically become a new borrower.
The borrower's signed promise to repay, with the principal, interest, payment terms, and maturity date.
Who owes the money? Read the note.
CFPB, the promissory noteThe security instrument creates a lien on the described property. In Florida, signing it does not convey title or possession to the lender.
What secures the debt? The property.
F.S. 697.02, mortgage as a lienThe mortgagor gives the mortgage, usually the borrower. The mortgagee receives that security interest, usually the lender.
The borrower gives security; the lender receives it.
FREC Course I syllabus, Sections 12 and 13A release showing that the mortgage lien has been satisfied. It is different from the note signed when borrowing.
Payoff and release come at the other end of the loan.
FREC Course I syllabus, Sections 12 and 1302 / Compare the loan programs
Identify who backs the loan and which costs apply. None of these labels promises that every applicant or property qualifies.
Federal insurance
FHA insures approved lenders. A small down payment does not guarantee approval, and FHA is not limited to first-time buyers.
Federal guaranty
A Certificate of Eligibility establishes eligibility for the benefit. The borrower and property still need to qualify for the loan.
No federal insurance or guaranty
Conventional describes government backing. Fixed-rate and adjustable-rate describe how interest changes. These are separate classifications.
These are the general federal rules for covered borrower-paid PMI on a single-family principal residence, for loans closed on or after July 29, 1999. High-risk loans and lender-paid insurance have different provisions.
80%
The scheduled balance, or an earlier balance reduced by extra principal payments, reaches 80% of original value. A written request, good payment history, current payments, and the required property-value and junior-lien conditions still matter.
78%
Generally tied to when the scheduled principal balance reaches 78% of original value, provided the borrower is current. Extra payments reaching 78% early do not turn that earlier date into the automatic-termination date.
½ term
If PMI has not ended earlier, it generally ends the month after the midpoint of the original amortization period, if payments are current. For a 30-year schedule, the midpoint is 15 years.
For a purchase, original value generally means the lower of the sale price or the original appraisal. Refinancing uses the value at refinance. CFPB, PMI cancellation and termination
No. For standard FHA loans with case numbers assigned on or after June 3, 2013, annual MIP generally lasts 11 years at an initial LTV of 90% or less, and for the loan term above 90%. That is why a borrower who started with a 3.5% down payment should not assume annual MIP ends after reaching 20% equity. Older FHA loans follow different provisions.
03 / Match the clause to the event
What happened: a default, a transfer, early payment, or a change in collateral? Use that event to choose the clause.
Permits a demand for the unpaid balance after a stated trigger, such as an uncured default. It is not merely a late-payment fee. Notice, cure rights, and applicable law still govern enforcement.
Addresses a sale or transfer without the lender's required consent. Federal law protects specified transfers involving covered residential loans, including qualifying family and trust transfers. A clause name alone does not decide whether a particular transfer is protected.
A defeasance provision ties discharge of the mortgage security to full payment or other required performance. Keep it separate from acceleration, which calls the debt due, and from a partial release, which releases only specified collateral.
An agreed change in lien priority. It does not cancel the debt, release the parcel, or substitute a new borrower.
Allows specified property to be released under agreed conditions while the lien remains on the rest. Think of one lot in a development covered by a blanket mortgage.
A prepayment provision concerns paying principal early. A penalty provision concerns a possible charge for doing so. Do not assume every loan permits that charge: the loan program, agreement, and applicable law control.
The syllabus identifies these concepts. The actual document and applicable law determine how a provision operates; a study label is not a substitute for reading the clause.
04 / Show the steps
Try each setup before opening the solution. These additional examples are free study exercises, separate from your quiz score. Rates and costs shown here are assumptions.
Worked example 01
A home sells and appraises for $400,000. The buyer borrows $320,000, with no second loan. Find the LTV and the cash toward the price.
LTV = loan ÷ value × 100
If the same property later has a $350,000 market value and the debt is still $320,000, equity is $30,000. Appreciation and debt repayment are separate ways equity can change.
Worked example 02
Gross monthly income is $8,000. Housing costs are $2,000, and other monthly debt payments are $800. Assume those figures include every obligation required by the question.
Ratio = monthly obligations ÷ gross monthly income × 100
Use gross income, not take-home pay. Add housing once in the total debt ratio. A 35% result is a calculation, not an approval decision; programs and lenders use different standards.
Worked example 03
Two discount points on a $300,000 loan cost $6,000. Assume the lender's written quote shows $125 less in monthly principal and interest for that upfront cost.
Points cost = loan × points ÷ 100
This simplified comparison ignores taxes, the time value of money, and differences in the remaining loan balance. One point does not buy a fixed rate reduction at every lender. The $125 saving is an assumption, not a current quote.
Worked example 04
At this example's adjustment, the index is 4.5% and the margin is 2.5%. The current rate is 4%, the applicable increase cap is 2 percentage points, and the lifetime ceiling is 9%. Assume no other rate constraints.
Fully indexed rate = index + margin
A 2-point cap adds two percentage points. It does not mean multiplying the old rate by 1.02. Read the initial, subsequent, and lifetime caps in the question.
Worked example 05
Assume a $240,000 balance, 6% annual interest with monthly accrual, and a $1,500 monthly principal-and-interest payment. There are no fees or arrears in this example.
Monthly interest = balance × annual rate ÷ 12
A tax or insurance escrow payment does not reduce this principal balance. On a fully amortizing fixed-rate loan, the principal share generally grows as the balance falls. A balloon loan leaves a balance due at maturity.
PITI means principal, interest, taxes, and insurance. A fixed interest rate does not freeze the tax and insurance portions of the payment. Mortgage insurance and association dues may add to the housing cost, too. Include the costs specified by the question when calculating a qualifying ratio.
CFPB, principal, interest, and the total payment05 / Follow the debt after a transfer
A deed, an assumption, a lender's consent, and a release of liability are separate steps. Do not treat one as proof of the others.
A $220,000 existing mortgage
Elena sells her home to Marcus with the existing lien still attached. Their agreement does not say Marcus assumes the debt.
Taking title alone does not make Marcus personally liable for Elena's note. The property remains exposed to foreclosure, and Elena's existing liability is not automatically released. A valid due-on-sale provision may also matter.
Marcus now promises to pay the assumed debt. That promise does not, by itself, establish Elena's release. Check the assumption, any required lender consent, and a separate release or novation.
After a Florida foreclosure sale
Assume an owner-occupied home, a $300,000 judgment, a $240,000 sale price, and a $270,000 fair market value on the sale date.
$300,000 − $270,000 = $30,000. The $60,000 difference between the judgment and the bid is not the ceiling in this example. F.S. 702.06 uses fair market value for covered owner-occupied property. The court still decides whether to award a deficiency.
A short sale and a deed in lieu are different from a completed judicial foreclosure. An agreement to release collateral is not automatically an agreement to forgive every remaining debt.
A contractual right to reinstate generally concerns curing the default and meeting the document's conditions so the loan continues. Redemption under F.S. 45.0315 concerns paying the amount required to redeem, including accelerated sums when applicable. It is not merely paying one overdue installment.
The statutory cutoff is before the later of the clerk's filing of the certificate of sale or the time specified in the foreclosure judgment, order, or decree. Do not replace it with a blanket right to redeem for a fixed number of days after every sale.
F.S. 45.0315, right of redemption · FREC Course I syllabus, Sections 12 and 13
06 / Review every answer
Choose a concept to open its question. You can read the answer, every wrong-choice explanation, and the source without completing the quiz or signing in.
Try each question before opening its answer. These are original practice items, not actual or recalled Pearson VUE exam questions.
Question 1 · mtg-1 · Note versus mortgage
Answer B. The promissory note, which is the borrower's written promise to repay
The promissory note records the borrower’s promise to repay and sets out the loan terms. The mortgage secures that obligation with a lien on the property. In Florida, the mortgage itself does not transfer title or possession to the lender. Read the note for the repayment promise and the mortgage for the security.
Remember: Identify each document's job: the note is the promise to repay, and the mortgage provides security for the obligation.
A. The mortgage, because it is recorded in the public record
Recording a mortgage gives notice of the security interest; it does not make the mortgage the promissory note.
C. The deed, because it transfers ownership
A deed transfers an ownership interest. It is not the borrower’s written promise to repay the loan.
D. The satisfaction, which proves the loan was made
A satisfaction releases a satisfied mortgage lien. It belongs at payoff, not at loan origination.
Sources: CFPB, the promissory note · F.S. 697.02, mortgage as a lien
Report a problem with mtg-1Question 2 · mtg-2 · Florida lien theory and foreclosure
Answer C. The borrower holds title and the lender holds a lien enforced through judicial foreclosure
F.S. 697.02 treats a mortgage as a lien, not a conveyance of title or possession. The borrower retains title in this purchase. F.S. 702.01 requires mortgage foreclosure through an equity action in court. Judicial foreclosure is the process for enforcing the mortgage after default, not an immediate transfer of ownership to the lender.
Remember: Use two Florida rules together: the mortgage creates a lien, and mortgage foreclosure proceeds through court.
A. The lender holds title and may take the property without going to court
The mortgage does not give a Florida lender title or a right to seize the home without the required process.
B. A trustee holds title and may sell the property without a court
That describes a trustee-based arrangement used elsewhere, not Florida’s mortgage lien and judicial foreclosure rules.
D. Title is split equally between borrower and lender until the loan is paid
The lender has security for the debt, not a half ownership share.
Sources: F.S. 697.02, mortgage as a lien · F.S. 702.01, judicial foreclosure
Report a problem with mtg-2Question 3 · mtg-3 · FHA insurance and down payment
Answer C. An FHA loan
FHA insures loans made by approved lenders. A qualifying buyer can make a down payment as low as 3.5%. Most standard FHA forward loans charge upfront MIP and annual MIP, with the annual premium collected in monthly installments. The program is not limited to first-time buyers, and the stated down payment does not by itself establish loan approval.
Remember: FHA insures; VA guarantees. FHA MIP is different from conventional PMI and follows different cancellation rules.
A. A VA loan
VA-backed loans use a federal guaranty and do not charge monthly mortgage insurance. That does not match the stated FHA-style insurance premiums.
B. A conventional loan with no mortgage insurance
Conventional financing has no federal insurance or guaranty. A loan expressly described as having no mortgage insurance also contradicts the question.
D. A loan with no insurance of any kind
The question expressly includes mortgage insurance premiums, so an uninsured program cannot fit.
Sources: HUD, FHA-insured loans · CFPB, mortgage insurance by loan type
Report a problem with mtg-3Question 4 · mtg-4 · VA benefits and fee exemptions
Answer C. A VA-backed loan, which generally uses a one-time funding fee instead of monthly mortgage insurance
A VA-backed purchase loan fits these facts. It can provide no-down-payment financing and does not charge monthly mortgage insurance. A funding fee usually applies and can be financed, but qualifying borrowers are exempt. Eligibility for the benefit is separate from meeting the lender’s underwriting and property requirements.
Remember: No down payment does not mean no closing costs. A funding fee is also not mandatory for every VA borrower.
A. FHA, because it requires only 3.5 percent down
A standard FHA purchase loan requires a minimum investment and mortgage insurance. It does not match both requested features.
B. A conventional loan at 80 percent loan-to-value
At 80% LTV, this conventional loan finances only 80% of the value used. It is not the stated no-down-payment program.
D. A subprime loan
Subprime describes lending to borrowers with higher credit risk. It is not the federal veteran benefit in the question.
Sources: VA, purchase-loan requirements · VA, funding fees and exemptions
Report a problem with mtg-4Question 5 · mtg-5 · PMI: 80% versus 78%
Answer A. Required above 80 percent LTV; automatic termination at 78 percent
PMI commonly applies above 80% initial LTV. Under the general federal rule, automatic termination is tied to the date the scheduled principal balance reaches 78% of original value, if the borrower is current. Borrower-requested cancellation is a separate route at 80%, including earlier principal reduction through extra payments, subject to the required conditions. FHA MIP and lender-paid insurance have different rules.
Remember: 80% is the general request threshold; 78% is the scheduled automatic threshold. Neither is simply a percentage of today’s higher market value.
B. Required above 90 percent LTV; automatic termination at 80 percent
This mixes up both thresholds. The common initial trigger is above 80%, and the general automatic point is scheduled 78%.
C. Required on every conventional loan for the life of the loan
PMI is not required on every conventional loan, and covered borrower-paid PMI is subject to cancellation and termination protections.
D. Required above 78 percent LTV; automatic termination at 75 percent
78% is the general automatic-termination point, not the common initial PMI trigger. A 75% automatic rule is not the rule tested here.
Sources: CFPB, PMI cancellation and termination · CFPB, mortgage insurance by loan type
Report a problem with mtg-5Question 6 · mtg-6 · ARM index, margin, and caps
Answer B. The index moves with the market and the margin is the lender's fixed markup
The index reflects a market benchmark. The margin is the lender’s add-on, fixed in the loan agreement after closing. Adding them gives the fully indexed rate; caps can limit the rate actually charged at an adjustment. A borrower may negotiate the margin when shopping for a loan, but cannot reset it after closing simply because market rates changed.
Remember: Index plus margin gives the target rate before caps. Initial, subsequent, and lifetime caps can produce a different rate at the next adjustment.
A. The index is the lender's fixed markup and the margin moves with the market
This reverses the definitions. The market benchmark is the index; the contractual add-on is the margin.
C. Both the index and the margin are set by the borrower
The borrower does not control the market index. The margin is agreed with the lender and fixed after closing, even though it may be negotiated beforehand.
D. Rate caps do not apply to adjustable-rate mortgages
ARMs commonly have rate caps. Ignoring an applicable cap can produce the wrong adjusted rate.
Sources: CFPB, ARM index and margin · CFPB, ARM adjustment caps
Report a problem with mtg-6Question 7 · mtg-7 · Discount points on the loan amount
Answer B. $6,000, and it lowers the interest rate
One discount point costs 1% of the loan amount. Here, $300,000 × 0.02 = $6,000. The borrower pays that upfront amount for the lower rate offered by the lender. The rate reduction per point is not fixed across loans. An origination charge compensates the lender for making the loan and is not automatically a rate buydown.
Remember: Use the loan amount, not the purchase price. Two points cost 2% of the loan; they do not necessarily reduce the rate by two percentage points.
A. $600, and it raises the interest rate
$600 is 0.2% of $300,000, not 2%. The question says the points buy a lower rate.
C. $3,000, and it has no effect on the rate
$3,000 buys one point on this loan. The question specifies two discount points.
D. $6,000, and it is only a lender processing fee
The arithmetic is right, but the purpose is wrong. These are discount points for a lower rate, not just an origination charge.
Sources: Truth in Lending Act, finance charge disclosures
Report a problem with mtg-7Question 8 · mtg-8 · Due-on-sale trigger and exceptions
Answer C. due-on-sale (alienation) clause
A due-on-sale clause, also called an alienation clause, generally allows the lender to accelerate repayment after an unauthorized transfer. Federal law protects certain transfers from enforcement, including some family transfers and transfers into qualifying trusts. This question asks for the clause name, not whether a particular transfer is exempt.
Remember: An acceleration clause is the general power to demand the full balance. A due-on-sale clause is the specific version triggered by transfer of the property.
A. prepayment penalty clause
A prepayment penalty concerns a possible charge for paying early. It does not name a transfer-triggered acceleration right.
B. subordination clause
Subordination changes lien priority. It does not call the entire debt due because ownership changes.
D. defeasance clause
Defeasance concerns discharge of the mortgage security after the obligation is satisfied. It is not the transfer clause.
Sources: 12 U.S.C. 1701j-3, due-on-sale clauses and protected transfers
Report a problem with mtg-8Question 9 · mtg-9 · Foreclosure shortfall and deficiency
Answer B. seek a deficiency judgment against the borrower for the remaining balance
The lender may seek a deficiency judgment; an award is not automatic. F.S. 702.06 leaves the decision to the court’s discretion. For owner-occupied residential property, the statutory ceiling uses the judgment amount minus the property’s fair market value on the sale date. A low foreclosure bid is therefore not automatically the measure of the recoverable deficiency.
Remember: Separate three figures: judgment amount, sale proceeds, and fair market value. Seeking a deficiency is not the same as receiving one.
A. not pursue the borrower further, because the property fully satisfies the debt
Foreclosure does not necessarily satisfy the full personal debt. A deficiency may remain, subject to the governing rules.
C. garnish the borrower's wages immediately without any further court action
A sale shortfall does not itself authorize immediate wage garnishment. Additional legal requirements and any applicable exemptions matter.
D. repossess other property the borrower owns without a court order
The lender cannot seize unrelated assets merely because the collateral sold for less than the debt.
Sources: F.S. 702.06, deficiency decree
Report a problem with mtg-9Question 10 · mtg-10 · Subject to versus assumption
Answer B. The buyer does not become personally liable for the existing debt, but the lender can still foreclose the property after default
Taking title subject to the mortgage does not, by itself, make the buyer personally liable for the existing note. The property remains collateral and can still be foreclosed. An express assumption adds a promise to pay the existing debt. Neither a deed nor an assumption automatically releases the original borrower; a release must be established separately. Transfer restrictions and lender requirements also need to be checked.
Remember: Ownership, personal liability, lender consent, and release of the seller are four separate questions.
A. The buyer becomes personally liable for the note and the seller is automatically released
This confuses taking title with assuming personal liability and incorrectly promises an automatic release of the seller.
C. The mortgage is extinguished automatically when the deed is delivered
The deed does not erase the recorded mortgage. The buyer takes the property with that lien still attached.
D. The lender must accept the buyer as a substitute borrower
A transfer of title does not force the lender to substitute borrowers or waive a valid due-on-sale provision.
Sources: Carus v. VRMTG Asset Trust (2021) · CFPB, mortgage transfers and personal liability · 12 U.S.C. 1701j-3, due-on-sale exceptions
Report a problem with mtg-10Your next step toward exam day
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07 / Check the full exam outline
The exam outline has eight headings in Residential Mortgages. This map distinguishes what the free resource covers from what still deserves practice.
In this resource: Florida lien theory and judicial foreclosure.
Also review: Compare title theory, hypothecation, and the parties' rights.
In this resource: The note, mortgage, and satisfaction.
Also review: Mortgage assignment, servicing, and an estoppel certificate confirming the status of a loan.
In this resource: Due on sale and the six-clause reference.
Also review: Notice, reinstatement, insurance, taxes, maintenance, and receivership provisions.
In this resource: FHA, VA, conventional loans, PMI, and ARMs.
Also review: Amortized, partially amortized, interest-only, and other loan structures.
In this resource: Subject-to purchases, assumptions, and release of liability.
Also review: Contract for deed, seller financing, and the effect of transfer restrictions.
In this resource: Related clause and amortization examples; not directly scored.
Also review: Construction and development loans, blanket mortgages, take-out commitments, and buydowns.
In this resource: Housing and total-debt ratio examples; not directly scored.
Also review: Income, credit, assets, property appraisal, and program-specific underwriting.
In this resource: Points in the quiz, plus five worked examples.
Also review: Additional LTV, equity, qualification, amortization, and yield problems from your course.
DBPR exam outline, Section XII supplies the exam weight and headings. FREC Course I syllabus, Sections 12 and 13 places related mortgage instruction across two course sections. Course section numbers and exam-outline categories are not identical; use the exam outline for the 9% weighting.
Start by identifying what the question is testing. A note establishes a repayment obligation. A mortgage secures it. A deed transfers an ownership interest. Confusing those jobs can turn an otherwise straightforward question into a guess.
Next, separate the loan program from the interest-rate structure. FHA, VA-backed, and conventional describe the backing of the loan. Fixed-rate and adjustable-rate describe interest. Mortgage insurance, a funding fee, and prepaid discount points are different costs with different purposes.
For a calculation, write the formula and label the units before entering the numbers. For a transfer or default, ask who is personally liable, what lien remains, and which contract or statute authorizes the next step. Never infer an automatic release of debt from a change in ownership.
Questions about mortgage practice
Residential Mortgages carries 9% of the published DBPR sales associate exam outline, about 9 questions on the 100-question exam. This free set has 10 original practice questions. The separate Types of Mortgages and Sources of Financing area carries 4%, so study both areas.
Florida is a lien theory state under F.S. 697.02. A mortgage gives the lender a lien, not title or possession. F.S. 702.01 separately requires mortgage foreclosure through a court action. Signing a mortgage does not make the lender an owner of the home.
The note records the borrower’s promise to repay and the repayment terms. The mortgage secures the obligation with a lien on the property. A deed transfers an ownership interest, and a satisfaction releases a satisfied mortgage lien. Each document has a different job.
FHA insures approved lenders and can allow a 3.5% down payment for a qualifying buyer. VA-backed loans use a federal guaranty, can allow no down payment, and have no monthly mortgage insurance. Conventional loans have no federal insurance or guaranty and commonly require PMI above 80% initial LTV. All still have underwriting requirements.
For covered borrower-paid PMI under the general federal rules, 80% of original value is the borrower-requested cancellation threshold, subject to conditions. Extra principal payments can reach that threshold early. Automatic termination generally uses the scheduled 78% point and requires current payments. Original value is not simply today’s market value.
Do not apply the conventional PMI rule to FHA MIP. For standard FHA loans with case numbers assigned on or after June 3, 2013, annual MIP generally lasts 11 years when initial LTV is 90% or less and for the loan term when initial LTV exceeds 90%. Earlier FHA loans have different rules.
No. VA lists exemptions, including borrowers receiving qualifying service-connected disability compensation, certain surviving spouses receiving Dependency and Indemnity Compensation, and qualifying active-duty Purple Heart recipients. Check the exemption requirements. No monthly mortgage insurance does not mean a VA loan has no closing costs.
Index plus margin gives the fully indexed rate. An introductory rate, adjustment caps, lifetime limits, and other loan terms can affect the rate actually charged. The margin is fixed after closing. It can be negotiated with the lender before the loan closes.
Multiply the loan amount by the number of points and divide by 100. Two points on a $300,000 loan cost $6,000. Discount points buy the rate reduction quoted by the lender; one point does not guarantee the same reduction on every loan.
Not automatically. An assumption creates a promise by the buyer to pay the assumed obligation. Release of the original borrower is a separate matter. A subject-to buyer takes ownership with the lien attached without assuming personal liability merely by accepting title.
A lender may seek a deficiency, but the court decides whether to award it. For owner-occupied residential property, F.S. 702.06 caps the amount using the judgment amount and the property’s fair market value on the sale date. The foreclosure bid alone does not determine that ceiling.
These are original Pass Florida study questions, not copied or recalled Pearson VUE exam items. All 10 questions, correct-answer explanations, 30 wrong-choice explanations, and worked examples are free without an account. For more practice across all 19 exam areas, open the web app or download Pass Florida for iPhone or Android.
Sources and editorial review
Published by Pass Florida. Reviewed on for rules in effect through .
This review checked the questions and explanations against Florida statutes, the published exam outline, the FREC syllabus, and HUD, VA, and CFPB guidance. The subject-to explanation also cites the Florida appellate opinion in Carus.
The calculations use stated assumptions, not advertised loan offers. Federal insurance rules are separated from Florida foreclosure law, and program features are separated from a lender's approval decision.
Found an error? Use the correction link under the question or send the question ID and supporting source.
Independent exam preparation. No affiliation with DBPR, FREC, Pearson VUE, HUD, or VA. This resource is for study, not a mortgage offer or advice about an individual foreclosure.
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