Real estate exam terms
10 terms, each with a plain definition, the term it is most often confused with, and how the license exam actually asks about it.
The total yearly cost of credit expressed as a percentage
It folds the interest rate together with points and most lender fees, which is why it is usually higher than the note rate. Comparing APRs is comparing total cost; comparing note rates is not.
The gap between the note rate and the APR is where the fees are, and items are built on exactly that observation.
The final statement of loan terms and closing costs, delivered before closing
It must be in the borrower’s hands a set number of business days before consummation so the final numbers can be compared against the Loan Estimate. Certain late changes restart that waiting period.
The waiting period is the point of the rule: the disclosure exists to be read before signing, not at the table.
Federal law prohibiting discrimination in any aspect of a credit transaction
It protects against discrimination on race, color, religion, national origin, sex, marital status, age, and because an applicant receives public assistance income. It also entitles a declined applicant to a statement of the reasons.
Credit history, income and length of employment are legitimate underwriting factors and are the distractors in these items — evaluating them is what a lender is supposed to do.
An unearned payment for referring settlement service business
Anything of value given or received for a referral — cash, gifts, discounted services, a paid holiday. RESPA prohibits it for federally related mortgage loans, and payment for services actually rendered at market value is the narrow line separating lawful from unlawful.
The examinable question is always whether anything was actually earned. If the payment is for the referral itself, it is prohibited.
The disclosure of estimated loan terms and costs given shortly after application
A standard form so offers from different lenders can be laid side by side. It states the rate, the projected payments and the estimated closing costs, and it is delivered early enough to be useful in choosing a lender.
Paired with the Closing Disclosure: estimate at the start, actual figures at the end.
Lending practices that exploit a borrower rather than serve them
The recognized patterns include equity stripping through repeated refinancing that consumes equity in fees, steering a borrower who qualifies for better terms into a worse product, inflating an appraisal to support an oversized loan, and burying costly features in the paperwork.
Risk-based pricing, required appraisals and required flood insurance are ordinary lending practice and are the distractors in these items.
The Real Estate Settlement Procedures Act, governing settlement services and referrals
It requires disclosure of settlement costs and prohibits kickbacks and unearned fees for referrals of settlement service business. Affiliated business arrangements are permitted but only under conditions, one of which is written disclosure of the relationship.
There is no small-amount exception and disclosure does not cure a kickback. A title company paying an agent for referrals is a violation regardless of the sum.
The rule combining Truth in Lending and RESPA disclosures into two forms
The TILA-RESPA Integrated Disclosure rule replaced the older forms with the Loan Estimate, delivered shortly after application, and the Closing Disclosure, which must reach the borrower before closing so there is time to compare the two. The Consumer Financial Protection Bureau administers it.
Know both form names and which end of the transaction each belongs to. The older Good Faith Estimate and HUD-1 are the standard distractors.
Federal law requiring the cost of consumer credit to be disclosed
It makes credit comparable rather than capping what it may cost, and the annual percentage rate exists precisely so two offers can be compared on one number. Regulation Z is the rule implementing it.
The advertising trigger terms are what catch licensees: state a specific figure such as the down payment, the number of payments or the monthly amount, and the full disclosures must accompany it. "Low monthly payments" alone is general enough not to trigger them.
Charging interest above the maximum a state’s law permits
Usury ceilings are set by state law and vary considerably, with exemptions for particular lender types and loan categories. Where a rate exceeds the ceiling, penalties can reach the interest and sometimes the principal.
A state-law subject that appears nationally as a vocabulary item: recognize it as an unlawfully high interest rate.
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