Texas Finance
Practice Questions & Answers (2026)
Finance questions on the Texas real estate exam cover mortgage types, loan-to-value ratios, qualifying ratios, and federal lending laws. The Texas Real Estate Commission (TREC) 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. Texas 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 TX 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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Texas Finance — Practice Questions & Answers
171 questions on Finance from the Texas real estate question bank. First 10 are free — sign up to unlock all 171.
Q1. Texas is a community property state. This means that property acquired during marriage:
Explanation
Texas is one of nine community property states. Property acquired during marriage is generally owned equally (50/50) by both spouses, regardless of how title is held or which spouse earned the income. This affects real estate transactions significantly.
Q2. Under Texas community property law, for a married person to convey real property, generally:
Explanation
Because Texas is a community property state, both spouses typically must join in or sign any deed conveying community real property. This requirement protects each spouse's ownership interest in jointly held marital property.
Q3. A Texas homestead is protected from forced sale for all of the following EXCEPT:
Explanation
The Texas homestead exemption protects a homeowner from forced sale by most creditors. However, it does NOT protect against ad valorem (property) taxes, purchase money mortgages, home equity loans, mechanic's liens for work on the property, or HOA assessments.
Q4. Under the Texas Home Equity law, a homeowner may borrow against their home equity provided the total debt against the homestead does not exceed:
Explanation
Texas Home Equity lending has strict constitutional protections. The combined loan-to-value ratio (all mortgages + home equity loan) cannot exceed 80% of the fair market value of the homestead.
Q5. An FHA loan differs from a conventional loan primarily because FHA loans are:
Explanation
FHA loans are not funded by the government but are insured by the Federal Housing Administration. This insurance allows lenders to offer loans with lower down payments (as low as 3.5%) and more flexible credit requirements than conventional loans.
Q6. In Texas, the primary security instrument used in residential real estate lending is a:
Explanation
Texas uses a deed of trust rather than a mortgage as the primary security instrument. The deed of trust involves three parties: the borrower (trustor), the lender (beneficiary), and a neutral third party (trustee) who holds legal title.
Q7. Under a Texas deed of trust, foreclosure is typically handled as a:
Explanation
Texas uses non-judicial foreclosure (power of sale foreclosure) under the deed of trust. The trustee can foreclose without court action after proper notice, making the process faster than judicial foreclosure states.
Q8. Texas non-judicial foreclosure sales take place on:
Explanation
Under Texas Property Code § 51.002, non-judicial foreclosure sales must occur on the first Tuesday of each month between 10 a.m. and 4 p.m. at the courthouse door or a designated location in the county.
Q9. Texas homestead laws protect a homeowner's primary residence from forced sale by creditors EXCEPT for:
Explanation
Texas's robust homestead protection prevents most creditors from forcing the sale of a homestead, but exceptions include purchase money liens (mortgage), property tax liens, mechanics' liens, and properly established home equity loans.
Q10. Texas home equity loans are governed by strict constitutional limits. The total debt secured against a Texas homestead cannot exceed:
Explanation
Texas Constitution Article XVI § 50 limits total debt on a homestead to 80% of the fair market value. Home equity loans in Texas are also limited to one per year and subject to significant consumer protections.
Q11. The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR) to borrowers. The APR differs from the interest rate because it:
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