Louisiana Finance
Practice Questions & Answers (2026)
Finance questions on the Louisiana real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Louisiana Real Estate Commission (LREC) 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. Louisiana 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 LA 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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Louisiana Finance — Practice Questions & Answers
157 questions on Finance from the Louisiana real estate question bank. First 10 are free — sign up to unlock all 157.
Q1. Under Louisiana law, a mortgage is called a:
Explanation
In Louisiana, the security instrument for real estate loans is generally called a conventional mortgage or a collateral mortgage, not a deed of trust as in many other states.
Q2. A USDA Rural Development loan is designed for buyers in:
Explanation
USDA Rural Development loans are available for eligible rural and certain suburban areas, providing 100% financing to buyers who meet income and property location requirements.
Q3. What is the purpose of RESPA (Real Estate Settlement Procedures Act)?
Explanation
RESPA requires lenders to disclose settlement costs, prohibits kickbacks between settlement service providers, and regulates escrow accounts to protect consumers.
Q4. A buyer secures a $200,000 mortgage at 6% interest. What is the monthly interest for the first payment?
Explanation
Monthly interest = Principal × Annual rate ÷ 12 = $200,000 × 0.06 ÷ 12 = $12,000 ÷ 12 = $1,000.
Q5. Which of the following would be considered a non-conforming loan?
Explanation
A non-conforming loan is one that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, also known as a 'jumbo loan.'
Q6. What does the term 'loan-to-value ratio' (LTV) mean in mortgage lending?
Explanation
Loan-to-value (LTV) ratio is calculated by dividing the loan amount by the property's appraised value. Lenders use LTV to assess lending risk; a higher LTV means more risk.
Q7. A buyer makes a 10% down payment on a $250,000 home. What is the loan-to-value ratio?
Explanation
Down payment = 10% × $250,000 = $25,000. Loan amount = $250,000 − $25,000 = $225,000. LTV = $225,000 ÷ $250,000 = 90%.
Q8. Private mortgage insurance (PMI) is typically required when the buyer's down payment is:
Explanation
Lenders typically require private mortgage insurance (PMI) when the buyer's down payment is less than 20% of the purchase price, as this represents higher lending risk.
Q9. What is a 'balloon mortgage'?
Explanation
A balloon mortgage features regular periodic payments, but the remaining loan balance becomes due in a single large (balloon) payment at the end of the term.
Q10. Under the Truth in Lending Act (TILA), the Annual Percentage Rate (APR) is designed to:
Explanation
TILA requires lenders to disclose the APR, which represents the true cost of borrowing by including not just the interest rate but also fees and other loan costs, expressed as an annual percentage.
Q11. A conventional loan that conforms to Fannie Mae and Freddie Mac guidelines is known as a:
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