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Practice questions: general mortgage knowledge

Compiled by the Sitonce editorial team from the NMLS Resource Center and the federal regulations named belowUpdated 2 min readFacts verified 4 September 2026
The short answer

General mortgage knowledge is 20 percent of the paper. These four cover FHA down payment tiers, VA funding fees, mortgage insurance termination and the conforming loan limit.

Twenty percent of the paper, and the area with the most distinctive numbers in it. That makes it good question material and good revision material.

Question 1

A borrower with a credit score of 560 wants an FHA loan. What is the minimum down payment?

  1. 3.5 percent
  2. 5 percent
  3. 10 percent
  4. 20 percent
Answer: C. 10 percent applies to scores between 500 and 579. The 3.5 percent figure in option A requires a score of 580 or above, and the two tiers are the whole point of the question.
Question 2

A veteran receiving compensation for a service-connected disability is buying with a VA loan. What applies?

  1. The funding fee is charged and may be financed
  2. The funding fee is waived
  3. Monthly mortgage insurance is charged instead
  4. A 3.5 percent down payment is required
Answer: B. Exemption from the funding fee is one of the situations candidates are expected to know. Option C misstates the program, which has no monthly mortgage insurance at all.
Question 3

A conventional loan reaches 78 percent loan-to-value based on the original value and the borrower is current. What happens to borrower-paid private mortgage insurance?

  1. It terminates automatically
  2. The borrower may request cancellation
  3. It continues for the life of the loan
  4. It terminates at the midpoint of the schedule
Answer: A. 78 percent is automatic termination under the Homeowners Protection Act. Option B describes 80 percent, which is cancellation on request - two numbers, two mechanisms.
Question 4

Who sets the conforming loan limit?

  1. The Consumer Financial Protection Bureau
  2. The Federal Housing Finance Agency, annually
  3. Each state regulator
  4. The Federal Reserve
Answer: B. The Federal Housing Finance Agency sets it and revises it annually, which is why you should never quote a fixed figure as permanent.

How to revise this area

Side by side rather than one program at a time. The questions ask you to distinguish FHA from VA from USDA, so learning them in a table is closer to how they are tested.

And learn what changes annually, so you know which numbers not to memorize.

Common questions

What is the FHA down payment at a 560 credit score?

10 percent. The 3.5 percent tier requires a score of 580 or above.

Who is exempt from the VA funding fee?

Veterans receiving compensation for a service-connected disability, among others.

When does PMI terminate automatically?

At 78 percent loan-to-value based on the original value, provided the borrower is current.

Who sets the conforming loan limit?

The Federal Housing Finance Agency, annually.

How should I revise the loan programs?

Side by side in a table, because the questions ask you to distinguish them rather than describe one.

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