Iowa Finance
Practice Questions & Answers (2026)
Finance questions on the Iowa real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Iowa Real Estate Commission 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. Iowa 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 IA 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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Iowa Finance — Practice Questions & Answers
160 questions on Finance from the Iowa real estate question bank. First 10 are free — sign up to unlock all 160.
Q1. Which of the following loan types is specifically designed for the purchase of manufactured homes and rural properties?
Explanation
The USDA Section 502 Guaranteed Loan Program is specifically designed to assist low-to-moderate income buyers in eligible rural and suburban areas, and may be used for manufactured homes and rural properties.
Q2. Amortization in a mortgage refers to:
Explanation
Amortization is the gradual reduction of the loan balance through scheduled payments that cover both interest and principal. In the early years, most of each payment goes toward interest; over time, more goes toward principal.
Q3. A buyer is obtaining a $200,000 mortgage at 7% annual interest. What is the first month's interest charge?
Explanation
Monthly interest = Loan Balance × (Annual Rate ÷ 12). $200,000 × (0.07 ÷ 12) = $200,000 × 0.005833 ≈ $1,166.67.
Q4. What is the purpose of an escrow impound account associated with a mortgage?
Explanation
An escrow impound account (also called an impound or reserve account) is set up by the lender to collect monthly amounts from the borrower for property taxes and homeowners insurance. The lender then pays these bills on the borrower's behalf when they come due.
Q5. The Closing Disclosure (CD) must be provided to the borrower at least how many business days before closing?
Explanation
Under TRID (TILA-RESPA Integrated Disclosure) rules, lenders must provide the Closing Disclosure at least 3 business days before consummation (closing). This gives the borrower time to review final loan terms.
Q6. Which federal law requires lenders to provide a Loan Estimate to borrowers within 3 business days of receiving a loan application?
Explanation
TRID (the TILA-RESPA Integrated Disclosure Rule, implemented in 2015) requires lenders to provide a Loan Estimate within 3 business days of receiving a complete loan application and a Closing Disclosure at least 3 business days before closing.
Q7. Private mortgage insurance (PMI) is typically required when a conventional loan's loan-to-value ratio exceeds:
Explanation
PMI is typically required when the borrower's down payment is less than 20% of the purchase price, meaning the loan-to-value ratio exceeds 80%. PMI protects the lender in case of default.
Q8. A buyer purchases a home for $250,000 with a 10% down payment. What is the loan-to-value (LTV) ratio?
Explanation
LTV = Loan Amount ÷ Property Value. Down payment = $25,000. Loan = $225,000. LTV = $225,000 ÷ $250,000 = 90%.
Q9. An adjustable-rate mortgage (ARM) typically features:
Explanation
An ARM has an interest rate that adjusts periodically (e.g., annually) based on a benchmark index (such as the SOFR or Treasury index) plus a fixed margin. Initial rates are often lower than fixed-rate mortgages but can rise over time.
Q10. The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on all of the following EXCEPT:
Explanation
ECOA prohibits discrimination in credit decisions based on race, color, religion, national origin, sex, marital status, age, and receipt of public assistance. Credit score is a legitimate financial factor lenders may use in loan decisions.
Q11. A balloon mortgage requires the borrower to:
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