3.0 Finance Real Estate License Practice Quiz
30 exam-style questions covering 10% of the Real Estate License exam. Instant feedback on every answer, progress tracking, no signup required.
This domain is part of the Georgia Real Estate Salesperson License practice test. Each question is tagged by exam objective and difficulty so you can drill exactly the areas you need.
Sample Questions
A homeowner's property is valued at $400,000 and has an outstanding mortgage balance of $250,000. The owner's equity is:
- A. $650,000
- B. $250,000
- C. $150,000
- D. $400,000
Equity equals the property's market value minus all liens: $400,000 − $250,000 = $150,000.
Compared to a 15-year fixed-rate mortgage for the same loan amount and interest rate, a 30-year fixed-rate mortgage will generally have:
- A. lower monthly payments but higher total interest paid over the life of the loan
- B. higher monthly payments and lower total interest paid over the life of the loan
- C. the same monthly payments because the interest rate is identical
- D. lower monthly payments and lower total interest paid over the life of the loan
Spreading principal repayment over 30 years lowers each payment, but the balance accrues interest for twice as long, resulting in far more total interest paid.
A buyer purchases a home for $320,000 and makes a $64,000 down payment. The loan-to-value (LTV) ratio at origination is:
- A. 20%
- B. 80%
- C. 64%
- D. 25%
LTV = loan amount ÷ value. Loan = $320,000 − $64,000 = $256,000. LTV = $256,000 ÷ $320,000 = 80%.
As a fully amortized mortgage matures over time, the portion of each monthly payment applied to principal:
- A. decreases because the lender's risk increases as the loan ages
- B. remains constant because the payment amount is fixed throughout the term
- C. increases as the outstanding balance falls and less interest is owed each month
- D. is set permanently by the lender at origination and never changes
Interest is calculated on the declining balance, so as the balance falls, less interest is owed and more of the fixed payment reduces principal.
An interest-only mortgage differs from a fully amortizing mortgage in that an interest-only loan:
- A. carries a lower interest rate because no principal is ever repaid
- B. gives the lender a partial ownership interest until the principal is repaid
- C. leaves the full original principal balance outstanding at the end of the interest-only period
- D. requires a larger down payment than a conventional amortizing mortgage
Because no principal is being repaid during the interest-only period, the entire original loan amount remains outstanding when that period ends.
In the early years of a fully amortized fixed-rate mortgage, the majority of each monthly payment is applied to:
- A. reduction of the outstanding loan principal
- B. insurance escrow and property tax reserves
- C. prepayment of future principal installments
- D. interest, with only a small portion reducing the principal balance
Because interest is calculated on the full outstanding balance in early years, most of the payment covers interest and very little goes to principal.
A borrower pays two discount points to obtain a lower interest rate on a $300,000 mortgage. How much does the borrower pay at closing for the points?
- A. $6,000
- B. $600
- C. $3,000
- D. $60,000
One point equals 1% of the loan amount. Two points = 2% × $300,000 = $6,000.
An investor purchases a rental property for $200,000, receives $18,000 in net operating income during the first year, and sells the property after one year for $210,000. The investor's approximate total return on the initial investment is:
- A. 9%
- B. 5%
- C. 4.5%
- D. 14%
Total return = income + gain = $18,000 + $10,000 = $28,000. $28,000 ÷ $200,000 = 14%.
Key Terms in This Domain
- Interest-only loan: Payments cover interest only for an initial period; principal balance does not amortize
- Amortization: Gradual loan repayment through periodic payments of principal and interest
- FHA loan: Federally insured loan with low down-payment and flexible credit; requires up-front and annual MIP
- VA loan: Loan guaranteed by the VA for eligible veterans; no down payment or PMI required, funding fee applies
- Fixed-rate mortgage: Interest rate stays the same for the entire loan term
- PITI: Principal, Interest, Taxes, and Insurance: the full monthly housing cost
- APR: Annual Percentage Rate; total cost of credit including interest plus most fees, expressed as a yearly rate (TILA)
- Foreclosure (judicial): Court-ordered sale of mortgaged property after default; required in lien-theory states
- Net to seller: Sale price − payoff of existing loans − seller's closing costs − commission = net proceeds to seller
- Cost to buyer: Down payment + closing costs + prepaids = cash to close
Link to this quiz
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Other Real Estate License Domains
- 1.0 Agency Relationships and Contracts
- 2.0 Real Property Ownership and Interest
- 4.0 Real Property
- 5.0 Marketing Regulations
- 6.0 Property Management
- 7.0 Real Estate Calculations
- 8.0 State Laws & Rules (Georgia)
- 9.0 Real Estate Practice in Georgia
- 10.0 Finance & Closing (Georgia)
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