General Mortgage Knowledge Practice Questions

Updated October 20, 2026

This area is 20% of the SAFE MLO test, about ~23 of the 115 scored questions. Below are 10 free practice questions written from the laws it covers, each with the answer, an explanation, and its source.

What this area covers

For the numbers behind ARMs and points, see mortgage math formulas.

Weights are from the NMLS content outline. Question counts are our arithmetic (weight × 115).

10 practice questions

1. Which agency sets the annual conforming loan limits for Fannie Mae and Freddie Mac?
  1. HUD
  2. The Federal Reserve
  3. CFPB
  4. FHFA
Show answer and explanation

Answer: D. FHFA
Correct — the Federal Housing Finance Agency publishes them each year.

Source: 12 U.S.C. 1717(b)(2) (GSE loan limits; annual adjustment via FHFA house price index)

2. Ginnie Mae's role in the secondary market is to:
  1. Buy conventional loans directly from lenders
  2. Insure loans against default
  3. Guarantee timely payment on mortgage-backed securities backed by government loans such as FHA and VA
  4. Make loans to consumers
Show answer and explanation

Answer: C. Guarantee timely payment on mortgage-backed securities backed by government loans such as FHA and VA
Correct — 12 U.S.C. §1721(g).

Source: 12 U.S.C. 1721(g)

3. Fannie Mae and Freddie Mac mainly support the mortgage market by:
  1. Setting interest rates by law
  2. Buying loans from lenders in the secondary market
  3. Originating loans to consumers
  4. Insuring FHA loans
Show answer and explanation

Answer: B. Buying loans from lenders in the secondary market
Correct — this replenishes lenders' funds.

Source: 12 U.S.C. 1716

4. The FHA upfront mortgage insurance premium (UFMIP) on most forward purchase loans is:
  1. 0.5%
  2. There is none
  3. 1.75% of the base loan amount
  4. 3.5%
Show answer and explanation

Answer: C. 1.75% of the base loan amount
Correct — HUD Handbook 4000.1, Appendix 1.0 (MIP).

Source: HUD Mortgagee Letter 2023-05 / HB 4000.1 App. 1.0

5. With a minimum decision credit score of 500–579, the maximum LTV for an FHA purchase loan is:
  1. 100%
  2. 80%
  3. 96.5%
  4. 90%
Show answer and explanation

Answer: D. 90%
Correct — HUD 4000.1 requires a 10% minimum investment for this score band.

Source: HUD Handbook 4000.1 II.A.4

6. A borrower with a minimum decision credit score of 480 applies for an FHA loan. The borrower is:
  1. Eligible with 20% down
  2. Eligible with 10% down
  3. Not eligible for FHA-insured financing
  4. Eligible with 3.5% down
Show answer and explanation

Answer: C. Not eligible for FHA-insured financing
Correct — under HUD 4000.1, scores below 500 aren't eligible.

Source: HUD Handbook 4000.1 II.A (MDCS eligibility)

7. Which loan programs generally allow qualified borrowers to buy with no down payment?
  1. Jumbo and FHA
  2. VA and USDA guaranteed loans
  3. HELOC and jumbo
  4. FHA and conventional
Show answer and explanation

Answer: B. VA and USDA guaranteed loans
Correct — both allow 100% financing for eligible borrowers.

Source: VA: Purchase loan

8. Which borrower is exempt from paying the VA funding fee?
  1. A veteran receiving VA compensation for a service-connected disability
  2. Any veteran with a 700+ credit score
  3. Any veteran putting 5% down
  4. Any first-time VA borrower
Show answer and explanation

Answer: A. A veteran receiving VA compensation for a service-connected disability
Correct — one of the VA's listed exemptions.

Source: VA: Funding fee exemptions

9. An active-duty service member is exempt from the VA funding fee if, on or before closing, they provide evidence of:
  1. Having served at least 90 days
  2. Having been awarded the Purple Heart
  3. A credit score above 620
  4. A spouse who is also a veteran
Show answer and explanation

Answer: B. Having been awarded the Purple Heart
Correct — per VA funding fee exemptions.

Source: VA: Funding fee exemptions

10. A surviving spouse is exempt from the VA funding fee when they:
  1. Remarry before age 40
  2. Buy a condo
  3. Receive Dependency and Indemnity Compensation (DIC)
  4. Have no other income
Show answer and explanation

Answer: C. Receive Dependency and Indemnity Compensation (DIC)
Correct — per VA funding fee exemptions.

Source: VA: Funding fee exemptions

Practice with every question

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Official sources

FAQ

What does general mortgage knowledge cover on the MLO test?

Loan products and programs: conventional, FHA, VA, USDA, ARMs, reverse mortgages, and QM and non-QM loans. It is 20% of the test.

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