Residential mortgages on the Florida real estate exam
Last reviewed: November 2026
Residential mortgages are exam area XII and carry 9% of the Florida sales associate exam, the third-largest area. The outline names FHA, VA and conventional loans, borrower qualifying and mortgage math. This page covers FHA loan requirements from the exam side rather than a lender's checklist: who insures or guarantees each loan, when mortgage insurance applies, and how to run the ratios.
FHA, VA and conventional loans compared
| FHA | VA | Conventional | |
|---|---|---|---|
| Government role | The Federal Housing Administration, part of HUD, insures the loan (HUD) | The VA backs (guarantees) loans made by private lenders; it also has a direct loan program (VA) | No government insurance or guarantee |
| Who lends | An FHA-approved private lender | A private lender (VA-backed) | A private lender |
| Down payment | As low as 3.5% of the purchase price, on 1–4 unit properties (HUD) | None, if the price is not higher than the appraised value (VA) | Set by the lender; under 20% usually means PMI (CFPB) |
| Mortgage insurance | Mortgage insurance premium (MIP), paid by the borrower (VA) | No PMI or MIP; a one-time funding fee instead (VA) | Private mortgage insurance (PMI) |
| Who may borrow | Any qualified buyer | Eligible veterans, service members and survivors with a Certificate of Eligibility, who will live in the home (VA) | Any qualified buyer |
Example: a $300,000 FHA purchase at the 3.5% minimum needs a $10,500 down payment. Program figures change, so treat these as the rules at the time of review, not permanent numbers.
FHA loan requirements the exam cares about
FHA does not lend money. A private lender makes the loan, and FHA insures it so the lender can offer easier terms: low down payments, low closing costs and easier credit qualifying (HUD). The borrower pays for that insurance through MIP. FHA also offers a reverse mortgage for owners 62 or older (HUD); its most common form is the Home Equity Conversion Mortgage (CFPB) (see types of mortgages).
VA loans and the funding fee
The VA funding fee is a one-time charge, paid at closing or financed into the loan, that replaces monthly mortgage insurance. Veterans who receive VA disability compensation do not pay it (VA). It is a percentage of the loan amount, not the price. Under the VA chart effective April 7, 2023, a first-time user with less than 5% down pays 2.15%: on a $300,000 loan that is $6,450. VA-backed loans can also be assumed by a buyer (VA).
PMI on conventional loans
Private mortgage insurance protects the lender, not the borrower. It is usually required on a conventional loan with less than 20% down (CFPB). Under the federal rules for single-family principal residences that closed on or after July 29, 1999 (CFPB):
- The borrower may ask in writing to cancel PMI when the balance is scheduled to reach 80% of the original value, if payments are current, there are no junior liens and the value has not declined.
- The servicer must end PMI automatically when the balance is scheduled to reach 78%, if payments are current.
- PMI also ends the month after the midpoint of the amortization schedule (15 years on a 30-year loan).
"Original value" is the lower of the sale price or the appraised value at purchase.
Qualifying ratios: housing and total debt
A debt-to-income ratio is monthly debt payments divided by gross monthly income (CFPB). A qualifying question may give a housing ratio (for PITI: principal, interest, taxes, insurance), a total-debt ratio, or both. Limits differ by loan program and lender, so use the ratios the question gives. The examples below use 28% and 36%.
| Step | Calculation |
|---|---|
| Gross monthly income | $7,200 |
| Housing limit (28%) | $7,200 × 0.28 = $2,016 |
| Total-debt limit (36%) | $7,200 × 0.36 = $2,592 |
| Minus other monthly debts | $2,592 − $780 = $1,812 |
| Maximum PITI | The lower figure: $1,812 |
Loan-to-value ratio
The loan-to-value ratio compares the amount financed with the property's appraised value. A bigger down payment means a lower LTV (CFPB). When price and appraisal differ, textbook problems use the lower figure, the same way the federal PMI rules define "original value" (CFPB). A buyer agrees to pay $320,000 and the home appraises at $310,000. At 90% LTV the loan is $310,000 × 0.90 = $279,000. The buyer brings $320,000 − $279,000 = $41,000, because the lender ignores the $10,000 above appraisal. For this loan, PMI can be cancelled on request at $248,000 (80% of $310,000) and ends automatically at $241,800 (78%).
Amortization basics
A fully amortized loan pays off with equal payments of principal and interest. Each month's interest is the balance × annual rate ÷ 12. The rest of the payment reduces principal. A $240,000 loan at 6.5% for 30 years has a monthly principal and interest payment of $1,516.96.
- Month 1 interest: $240,000 × 0.065 ÷ 12 = $1,300.00
- Principal paid: $1,516.96 − $1,300.00 = $216.96
- New balance: $239,783.04
Early payments are mostly interest, and the principal portion grows each month. Over 360 payments the borrower pays 360 × $1,516.96 − $240,000 = $306,105.60 in interest. Payments and loan formulas are also in real estate exam math.
Exam traps
- FHA insures; VA guarantees (backs). Neither is usually the lender.
- PMI protects the lender. The borrower pays for it.
- The VA funding fee is figured on the loan amount, not the price.
- When price and appraisal differ, base the loan on the lower figure. The buyer pays the difference in cash.
- The maximum payment is the lower of the two ratio results. Subtract other debts only from the total-debt figure.
Practice question
A buyer earns $8,000 a month and pays $1,100 a month on a car loan and student loans. The lender uses 28% and 36% ratios. What is the maximum monthly PITI?
A) $1,140. B) $1,780. C) $2,240. D) $2,880.
Answer: B. Housing: $8,000 × 0.28 = $2,240. Total debt: $8,000 × 0.36 = $2,880 − $1,100 = $1,780. The lower result, $1,780, is the limit. C ignores the other debts; D is the total-debt ceiling before subtracting them.
Test yourself
The free Florida practice test includes mortgage theory, FHA, loan clauses and a qualifying-ratio problem, each with a worked explanation. For more area XII drills and timed full exams, see the paid question bank.
Sources: HUD "Loans"; VA "Purchase loan" and "VA funding fee and loan closing costs"; CFPB answers on PMI, PMI removal, debt-to-income and loan-to-value. Real Estate Drill is an independent study tool, not lending advice. We are not affiliated with FREC, DBPR, Pearson VUE, HUD, the VA or the CFPB.