How Do You Know When You’re Ready to Take the NMLS Mortgage Licensing Exam?

So you’ve decided to become a residential mortgage loan originator!  Congratulations on the career move.  You’ve completed all NMLS-required pre-licensing education and you’re ready to go.  There’s only one thing standing between you and your MLO license application … passing the NMLS National MLO licensing examination.

Allow me to begin by reassuring you that the NMLS exam is a passable exam.  The reason why 50% of those who attempt to take it are never able to pass it, however, stems primarily from inadequate preparation.  And yes, you read that right!  Per the NMLS itself, the overall failure rate for this exam hovers right around 50%.

Why Do So Many Prospective Mortgage Loan Originators Fail The NMLS Exam?

Back in 2008, when Congress was structuring the SAFE Act, the Mortgage Industry was not thrilled at the prospect of its mortgage loan originators confined to a classroom, or perched in front of a computer screen, taking a class when, instead, they could be out on the streets selling and generating revenue.  Prior to 2008, the Mortgage Industry typically viewed training as a necessary evil only to be conducted when absolutely mandatory.  The philosophy of the times was, “Learn as you go.  Throw as much as you can against the wall to see what sticks, and, if you inconvenience or hurt someone along the way, simply apologize, move on, and all is once again right with the world.”  The last place that mortgage managers wanted their salespeople was tied up in some classroom learning what they could otherwise learn selling on the streets through trial and error.

Reeling to the Mortgage Industry’s pressure, Congress finalized the SAFE Act by only requiring 20-hours of pre-licensing education.  The NMLS exam, however, tests on over 150 hours’ worth of material.  Are you starting to get the picture?

By itself, no 20-hour pre-licensing course can ever effectively prepare anyone for the NMLS exam.  That’s because no pre-licensing course can effectively deliver 150 hours’ worth of material in a 20-hour timeframe.  Once you complete your pre-licensing education, that’s when your exam prep begins.

Do Not Schedule Your NMLS Exam Immediately After Completing Pre-Licensing Education

Let’s try a couple practice test questions to gauge your readiness, shall we?

  1. If a property’s TLTV is 74%, the first mortgage’s LTV is 58%, and the property’s value is $655,000, what is the home equity line of credit’s total available credit limit?
  1. $104,800
  2. $379,900
  3. $474,700
  4. $655,000

Congratulations if you selected answer option “a.”  If both liens constitute 74% of the property’s value and one of those liens amounts to 58%, it stands to reason that the other lien amounts to 16% (74 – 58 = 16).  By multiplying the property’s $655,000 value by 16%, you correctly conclude that the HELOC’s total available credit limit amounts to $104,800 (655,000 x 16%).

  1. Which of the following loan products might be the most suitable option for a borrower wanting to purchase a home in an isolated environment with little funds to use towards her down payment?
  1. A VA loan
  2. A construction-to-permanent loan
  3. An FHA 203(k)
  4. A Section 502 loan

Congratulations if you selected answer option “d.”  The USDA loan, also referred to as the Section 502 loan, allows for no down payment as long as the property is located in an approved rural area.

  1. Which of the following would prevent an individual from receiving an MLO license?
  1. Significant medical collection accounts appearing on his credit profile
  2. A misdemeanor conviction from three months prior
  3. A felony forgery conviction from twelve years prior
  4. A felony assault conviction from nine years prior

Congratulations if you selected answer option “c.”  Prior felony convictions will only prevent a licensing candidate from being issued his or her mortgage loan originator license if they occurred within the previous seven-year period preceding the date of the license application or if at any time when the felony involved an act of fraud, dishonesty, breach of trust, or money laundering.

How did you do?  Obviously, even if you got them all correct, that doesn’t prove that you’re ready for the NMLS exam.  So how then can you know, with any degree of confidence, that you’re ready?

You complete your 20-hour course and now is when the real preparation begins.  I’m regularly asked how much studying and preparation is necessary before it’s safe to take the NMLS exam.  The answer to that is, there is no answer.  Everyone learns at different paces and capacities.  I’ve worked with some people who have taken two weeks to effectively prepare for the NMLS exam and with others who have taken months.  The only way to know that you’re ready, therefore, is by satisfying the four strategies to NMLS exam success:

  1. Knowledge
  2. Understanding
  3. Proficiency
  4. Strategy

The Four Strategies to NMLS Exam Success


The first strategy that must be mastered is knowledge.  By this I mean that the successful NMLS exam candidate must become intimately familiar with everything appearing on the NMLS Test Content Outline.  The NMLS Test Content Outline is not only the guidance for NMLS-approved education providers to use when creating their courses, it’s also the foundation used by the NMLS to create the NMLS exam.  Be warned!  The NMLS Test Content Outline covers a lot of material.  But, just as a law or medical student must master copious amounts of material to satisfy their prerequisites, so must the MLO licensing candidate if he or she wants to pass this exam.

The good news is that the NMLS Test Content Outline’s bark is worse than its bite.  It contains a significant amount of generalization and redundancy so there is really less information to learn than what appears at first glance.

Please note that there are four regulations on which you may be tested that do not appear on this outline:

  • The Housing and Economic Recovery Act (HERA);
  • The Community Reinvestment Act (CRA);
  • The Mortgage Assistance Relief Services Rule (MARS); and
  • The Fair Housing Act (FHA).

Unlike the requirements for the sixteen other laws, rules, and regulations with which you need to be familiar, for these four you are only required to maintain a generalized knowledge.

You may access the NMLS Test Content Outline through AxSellerated Development’s Helpful Links & Tools within the RESOURCES section at


If you had to bring your car to a mechanic, you would expect that mechanic to be familiar with all of the parts that comprised the engine, right?  Of course!  I think that it’s reasonable to assume, therefore, that you would also expect your mechanic to understand how all of those parts worked together to facilitate the fully-functioning automobile.

Knowing what you need to know from the NMLS Test Content Outline is great.  But it’s not enough.  You must also achieve a functional understanding of how what you know works with the other things that you know to facilitate mortgage originations practices.  One of the best ways to demonstrate your understanding is by being able to conduct articulate conversations about everything appearing on the NMLS Test Content Outline.

You can practice this with others who are in the same boat as you by joining and networking through the free SAFE Mortgage Exam Training Facebook Group accessible via:


Proficiency is strategy number three.  Demonstrating proficiency means consistently scoring in the mid-to-high 90s on quality practice exams taken through multiple sources.  If you’re scoring in the 70s and 80s, that’s a start.  But you will not have satisfied this strategy until you’re scoring higher.

I must note that one should never use practice exams as one’s sole and primary means for preparing for the NMLS exam.  No practice exam is ever allowed to replicate an actual NMLS test question.  Therefore, people who prepare for the NMLS exam by only taking practice exams typically wind up memorizing questions and answers without understanding the meanings behind them.  And these are questions and answers that they’ll never see on the NMLS exam itself.  They develop a high level of confidence going into the NMLS exam, only to fail it miserably after realizing that they are unable to answer any of the actual NMLS test questions with which they’re presented.

Practice exams must be considered as an integral part of preparing for the NMLS exam.  But only as a supplement to standard study practices.  Quality practice exams may be procured through


Strategy itself is the fourth strategy.  The NMLS exam is inherently tricky.  The NMLS intentionally structures it this way to weed out those who do not properly prepare.  Through the NMLS exam prep webinar recording, “Maximizing Your Success,” you will learn sixteen test-taking tips and strategies to assist you in navigating the NMLS exam’s tricky nature.  You may access this webinar recording through

NMLS Exam Readiness Assessment

AxSellerated Development offers an NMLS Exam Readiness Assessment through which your readiness will be measured prior to you committing to the NMLS exam.  For only $25, you will receive a comprehensive assessment report of your readiness to help you determine whether or not more preparation is required.  You may register for your ½-hour NMLS Readiness Assessment session through

Once you’ve mastered the four NMLS strategies to NMLS exam success (Knowledge, Understanding, Proficiency, and Strategy) then, and only then, will you know that you’re ready to tackle and conquer the only remaining obstacle standing between you and your goal of becoming that steely-eyed mortgage loan originator!  Good luck!

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