Colorado Finance
Practice Questions & Answers (2026)
Finance questions on the Colorado real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Colorado Division of Real Estate tests both the mechanics of real estate financing and the regulatory framework — particularly RESPA, TILA (Truth in Lending), and the TRID rules that govern loan disclosures. Colorado candidates often lose points on financing questions because they understand the concept but miss the specific numerical thresholds or disclosure timing requirements that appear on the CO exam. Pay particular attention to ARM vs. fixed-rate mortgage distinctions, the calculation of LTV ratios, and what information must appear in specific disclosure documents.
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Colorado Finance — Practice Questions & Answers
139 questions on Finance from the Colorado real estate question bank. First 10 are free — sign up to unlock all 139.
Q1. A Colorado buyer obtains an FHA loan to purchase a $350,000 home. The FHA minimum down payment is 3.5%. What is the minimum down payment required?
Explanation
FHA minimum down payment = $350,000 × 3.5% = $12,250. FHA loans are popular because of the low down payment requirement, though mortgage insurance premiums (MIP) are required.
Q2. Which of the following best describes a deed of trust in Colorado?
Explanation
Colorado commonly uses a deed of trust rather than a mortgage. In a deed of trust, title is held by a public trustee (not a private trustee) on behalf of the lender until the loan is repaid.
Q3. What does the loan-to-value (LTV) ratio measure?
Explanation
LTV = Loan Amount / Appraised Value × 100. A lower LTV indicates more equity and lower risk for the lender. Most conventional loans require an LTV of 80% or less to avoid private mortgage insurance (PMI).
Q4. A property in Colorado sells for $420,000. The buyer makes a 20% down payment and obtains a conventional mortgage. What is the loan amount?
Explanation
Down payment = $420,000 × 20% = $84,000. Loan amount = $420,000 − $84,000 = $336,000.
Q5. Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a mortgage application?
Explanation
TRID (the TILA-RESPA Integrated Disclosure rule) requires lenders to provide a Loan Estimate within 3 business days of receiving a complete loan application, replacing the old GFE and TIL disclosure forms.
Q6. In Colorado, a 'public trustee' plays what role in a deed of trust foreclosure?
Explanation
Colorado uses a unique public trustee system. Each county has a public trustee (a county official) who holds title under a deed of trust and conducts the non-judicial foreclosure sale when the borrower defaults.
Q7. Colorado's foreclosure process under a deed of trust is primarily:
Explanation
Colorado's primary foreclosure method under a deed of trust is non-judicial, handled by the county public trustee. This process is generally faster and less expensive than judicial foreclosure. A court may still be involved for certain deficiency judgments.
Q8. What is the debt-to-income (DTI) ratio that most conventional lenders prefer to not exceed for a borrower's total monthly debt?
Explanation
Most conventional lenders prefer a total (back-end) DTI ratio of 43% or less for conventional loans. The front-end ratio (housing expenses only) is typically limited to 28%. FHA and other programs may allow higher ratios.
Q9. An adjustable-rate mortgage (ARM) includes a 'cap' feature. What does this cap limit?
Explanation
ARM caps limit how much the interest rate can increase: the periodic cap limits changes per adjustment, the lifetime cap limits total increase over the loan term. This protects borrowers from unlimited rate increases.
Q10. A Colorado borrower obtains a $300,000 loan at 6% annual interest, interest only. What is the monthly interest payment?
Explanation
Monthly interest payment = $300,000 × 6% ÷ 12 = $300,000 × 0.005 = $1,500.
Q11. Private mortgage insurance (PMI) is typically required when the loan-to-value ratio exceeds:
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