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Practice and exam technique

Practice questions: calculations

Compiled by the Sitonce editorial team from the NMLS Resource Center and the federal regulations named belowUpdated 3 min readFacts verified 4 September 2026
The short answer

Four worked calculations covering the housing ratio, loan-to-value, discount points and an ARM adjustment. Each shows both the answer and the specific error each wrong option represents.

Calculations are not hard. They are quick to get wrong under time pressure, and every wrong option is a mistake somebody actually makes.

Question 1

A borrower earns 6,000 dollars a month gross and 4,500 dollars after tax. The proposed housing payment is 1,680 dollars. What is the housing ratio?

  1. 28 percent
  2. 37 percent
  3. 25 percent
  4. 35 percent
Answer: A. 1,680 divided by 6,000 is 28 percent. Option B is what you get from using take-home pay, which is the single commonest error on this calculation. Ratios always use gross monthly income.
Question 2

A property is purchased for 300,000 dollars and appraises at 290,000 dollars. The loan is 261,000 dollars. What is the loan-to-value?

  1. 87 percent
  2. 90 percent
  3. 85 percent
  4. 93 percent
Answer: B. 261,000 divided by 290,000 is 90 percent, because loan-to-value uses the LESSER of price and appraised value. Option A is what you get from dividing by the 300,000 purchase price, which is exactly why both figures appear in the stem.
Question 3

A borrower pays 2 discount points on a 250,000 dollar loan to save 90 dollars a month. What is the break-even period?

  1. About 28 months
  2. About 56 months
  3. About 42 months
  4. About 14 months
Answer: B. Two points on 250,000 dollars is 5,000 dollars. 5,000 divided by 90 is about 56 months. Option A is what you get from calculating one point instead of two.
Question 4

An ARM starts at 4 percent with 2/2/5 caps. At the first adjustment the index is 5 percent and the margin is 3 percent. What is the new rate?

  1. 8 percent
  2. 6 percent
  3. 9 percent
  4. 5 percent
Answer: B. Index plus margin is 8 percent, but the initial cap allows only 2 percentage points of movement, so the rate goes to 6 percent. Option A is the fully indexed rate with the cap forgotten, which is the classic ARM error.

The pattern in the distractors

Wrong answerBuilt from
37 percentNet income instead of gross
87 percentThe purchase price instead of the lesser value
28 monthsOne point instead of two
8 percentForgetting to apply the cap

Recognizing the mistake behind an option is faster than recomputing. It is also how you catch your own error before selecting it.

Common questions

Are there calculations on the NMLS exam?

Yes, throughout, particularly in origination activities and general mortgage knowledge.

Do ratios use gross or net income?

Gross monthly income. Using take-home pay is the commonest error and its result is always among the options.

Which value is used for loan-to-value?

The lesser of the purchase price and the appraised value.

How do you calculate a points break-even?

Divide the total cost of the points by the monthly saving.

What is the classic ARM mistake?

Calculating index plus margin and forgetting to apply the cap. The fully indexed rate is always offered as a distractor.

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