Montana Finance
Practice Questions & Answers (2026)
Finance questions on the Montana real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Montana Board of Realty Regulation 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. Montana 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 MT 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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Montana Finance — Practice Questions & Answers
132 questions on Finance from the Montana real estate question bank. First 10 are free — sign up to unlock all 132.
Q1. A buyer obtains a mortgage loan where the interest rate can change periodically based on a market index. This is known as a:
Explanation
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on changes in a specified index, which can cause the monthly payment to increase or decrease.
Q2. Under the Truth in Lending Act (TILA), what must lenders disclose to borrowers?
Explanation
TILA requires lenders to disclose the annual percentage rate (APR) and total finance charges so borrowers can compare loan costs across different lenders.
Q3. A loan-to-value ratio (LTV) of 80% on a $300,000 purchase means the borrower is financing:
Explanation
LTV of 80% means the loan is 80% of the purchase price: $300,000 × 0.80 = $240,000. The borrower's down payment would be $60,000 (20%).
Q4. Private mortgage insurance (PMI) is typically required when:
Explanation
PMI is generally required by lenders when the borrower's down payment is less than 20% (LTV greater than 80%), protecting the lender in case of borrower default.
Q5. A 'due-on-sale' clause in a mortgage requires:
Explanation
A due-on-sale (acceleration) clause requires the entire outstanding loan balance to be paid in full when the property is transferred to a new owner, preventing loan assumption without lender approval.
Q6. A fully amortizing mortgage loan is one in which:
Explanation
A fully amortizing loan means that regular principal and interest payments are calculated so the loan balance reaches exactly zero at the end of the loan term.
Q7. FHA loans are insured by:
Explanation
FHA loans are insured by the Federal Housing Administration, a division of HUD. This insurance protects lenders against borrower default, allowing lower down payments and more flexible qualifying criteria.
Q8. The secondary mortgage market primarily serves to:
Explanation
The secondary mortgage market (Fannie Mae, Freddie Mac, Ginnie Mae) buys existing mortgage loans from primary market lenders, providing liquidity so those lenders can make additional new loans.
Q9. A balloon mortgage typically requires:
Explanation
A balloon mortgage has regular payments (often interest-only or partially amortizing), but the remaining principal balance becomes due as a large lump-sum payment at the end of a specified short term.
Q10. Under RESPA (Real Estate Settlement Procedures Act), kickbacks between settlement service providers are:
Explanation
RESPA prohibits kickbacks and unearned fees between settlement service providers (e.g., between a title company and a mortgage broker). Such arrangements inflate consumer costs and are illegal.
Q11. A conventional loan is best described as a mortgage loan that is:
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