Mortgage Loan Originator (MLO) Licensing Practice Test

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Prepare for the Mortgage Loan Originator Licensing Exam. Study with flashcards and multiple choice questions, each question offers hints and explanations. Ace your exam with confidence!

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Do construction loans need a Loan Estimate?

  1. Yes

  2. No

  3. Only if the borrower asks for one

  4. Only if the loan amount exceeds $100,000

The correct answer is: Yes

Construction loans do indeed require a Loan Estimate. The Loan Estimate is a critical document in the mortgage process established by the TRID (TILA-RESPA Integrated Disclosure) rule, which is designed to provide borrowers with important information about the key features, costs, and risks of the mortgage loan for which they are applying. The requirement for a Loan Estimate applies to most types of mortgage loans, including construction loans. These loans can often involve complex terms and varying costs due to the construction process, which may include costs that can vary as the project progresses. Providing a Loan Estimate ensures that borrowers receive clear and upfront information regarding the estimated costs and terms associated with their loan, allowing them to make more informed decisions. Other options do not reflect the regulatory requirements established for mortgage lending. For example, the notion that a Loan Estimate would only be necessary if the borrower asks for one or if the loan amount exceeds a certain threshold does not align with compliance standards.

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