Michigan Finance
Practice Questions & Answers (2026)
Finance questions on the Michigan real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Michigan Department of Licensing and Regulatory Affairs (LARA) 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. Michigan 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 MI 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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Michigan Finance — Practice Questions & Answers
142 questions on Finance from the Michigan real estate question bank. First 10 are free — sign up to unlock all 142.
Q1. A Michigan buyer borrows $280,000 at a 7% annual interest rate. What is the approximate monthly interest for the first payment?
Explanation
Monthly interest = $280,000 × (7% ÷ 12) = $280,000 × 0.005833 = $1,633.24. This is the interest-only portion of the first month's payment.
Q2. Under RESPA, a kickback or fee-splitting arrangement between a lender and a settlement service provider is:
Explanation
RESPA Section 8 prohibits kickbacks and fee-splitting among settlement service providers in federally related mortgage transactions, regardless of disclosure. Violations carry civil and criminal penalties.
Q3. An FHA loan differs from a conventional loan in that FHA loans:
Explanation
FHA loans are insured by the Federal Housing Administration, which reduces lender risk and allows borrowers to qualify with as little as 3.5% down, lower credit scores, and higher debt ratios than conventional loans.
Q4. A buyer's loan-to-value (LTV) ratio is 90%. This means:
Explanation
LTV = Loan amount ÷ Appraised value. An LTV of 90% means the buyer financed 90% of the appraised value, putting 10% down.
Q5. An adjustable-rate mortgage (ARM) typically starts with:
Explanation
ARMs typically start with a lower introductory (teaser) rate compared to fixed-rate mortgages. After the initial fixed period, the rate adjusts periodically based on a market index.
Q6. A Michigan buyer obtains a conventional loan with a 20% down payment. The buyer's primary benefit of putting 20% down is:
Explanation
When a buyer puts 20% or more down on a conventional loan, they avoid the requirement to pay private mortgage insurance (PMI), which can significantly reduce their monthly payment.
Q7. Which type of mortgage loan is backed by the Federal Housing Administration?
Explanation
FHA loans are insured by the Federal Housing Administration, allowing buyers with lower credit scores and smaller down payments (as low as 3.5%) to qualify for mortgage financing.
Q8. In Michigan, the Truth-in-Lending Act (TILA) requires lenders to disclose the loan's:
Explanation
TILA requires lenders to disclose the Annual Percentage Rate (APR) and total finance charges, giving borrowers a standardized way to compare the true cost of different loan options.
Q9. A Michigan property is purchased with a $350,000 mortgage at 6.5% annual interest. What is the first month's interest payment?
Explanation
First month's interest = $350,000 × (6.5% ÷ 12) = $350,000 × 0.005417 = $1,895.83.
Q10. Discount points paid on a Michigan mortgage loan are used to:
Explanation
Discount points are prepaid interest paid at closing to reduce the loan's interest rate. Each point equals 1% of the loan amount and typically reduces the rate by about 0.25%.
Q11. A Michigan adjustable-rate mortgage (ARM) differs from a fixed-rate mortgage because:
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