Minnesota Finance
Practice Questions & Answers (2026)
Finance questions on the Minnesota real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Minnesota Department of Commerce 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. Minnesota 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 MN 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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Minnesota Finance — Practice Questions & Answers
150 questions on Finance from the Minnesota real estate question bank. First 10 are free — sign up to unlock all 150.
Q1. A Minnesota borrower takes out a $320,000 mortgage at 6% annual interest. What is the first month's interest?
Explanation
Monthly interest = $320,000 × (6% ÷ 12) = $320,000 × 0.005 = $1,600.
Q2. Under the Truth in Lending Act (TILA), lenders must disclose all of the following EXCEPT:
Explanation
TILA requires disclosure of the APR, total finance charges, total of all payments, and payment schedule. The borrower's credit score is not a TILA-mandated disclosure (though it may be required under other laws).
Q3. A VA loan benefit available to eligible veterans includes:
Explanation
VA loans are available to eligible veterans and military personnel with no down payment required, no private mortgage insurance, and competitive interest rates. Loan limits and costs vary.
Q4. A balloon mortgage requires the borrower to:
Explanation
A balloon mortgage involves regular payments (often interest only or partially amortized) with the remaining balance due in a large lump sum (balloon payment) at the end of the term.
Q5. Regulation Z under TILA applies to:
Explanation
Regulation Z implements TILA and applies to consumer credit transactions — those with a finance charge or payable in more than four installments — requiring disclosure of cost of credit terms.
Q6. A mortgage where the interest rate adjusts periodically based on an index is called a(n):
Explanation
An adjustable-rate mortgage (ARM) has an interest rate that changes at specified intervals based on a benchmark index (such as SOFR), subject to caps on periodic and lifetime adjustments.
Q7. Private mortgage insurance (PMI) is typically required when the buyer's down payment is:
Explanation
PMI is generally required by conventional lenders when the borrower's down payment is less than 20% of the purchase price, protecting the lender against default risk.
Q8. A Minnesota buyer obtains a $280,000 FHA loan. The FHA upfront mortgage insurance premium (UFMIP) rate is 1.75%. What is the UFMIP amount?
Explanation
UFMIP = $280,000 × 1.75% = $280,000 × 0.0175 = $4,900.
Q9. Discount points paid at closing on a Minnesota mortgage loan:
Explanation
Each discount point equals 1% of the loan amount and prepays interest, resulting in a lower interest rate for the life of the loan. Paying points makes sense if the borrower plans to hold the loan long-term.
Q10. The debt-to-income (DTI) ratio used by lenders is calculated as:
Explanation
DTI = Total monthly debt payments (including proposed housing payment) ÷ Gross monthly income. Most conventional lenders prefer a back-end DTI of 43% or less.
Q11. A buyer's gross monthly income is $7,500. The lender's maximum front-end DTI ratio is 28%. What is the maximum monthly housing payment allowed?
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