How To: Pass the NMLS Exam and Support Team Members

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nmls exam

The NMLS exam is mandatory for every mortgage professional who originates loans, except those employed by FDIC Insured Banks. So, being licensed means having to pass the National Mortgage Licensing System (NMLS) pre-licensing exam. 

But, passing the exam is no easy task. Keep reading to learn how to ace the NMLS exam and support your team members in doing so too. 

nmls exam

What is the difference between a state-licensed mortgage loan originator (MLO) and a federally registered NMLS?

Two categories of MLOs exist nationwide under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). The first is federally registered MLOs who work for federally chartered banks, credit unions, or other federally regulated financial companies. The second is state-licensed MLOs, regulated by state agencies. 

All individual MLOs register nationally with the public federal database for MLOs, the Nationwide Mortgage Licensing System (NMLS).

How do you become an MLO?

Every state has different requirements to become an MLO. But, there are a few average requirements. This includes being at least eighteen years of age. Also, obtaining an NMLS number.  Another requirement is taking 20 hours of prelicensure education courses approved by NMLS. 

Certain states require that mortgage loan officers complete state-specific education.  And, under the SAFE Act, all state-licensed loan originators must pass the national exam.  

Support your team

Whether you’re an independent loan officer who works alone, or you manage a team of LOs, LOAs, and support staff, building a mortgage team that works well together is the best way to ensure you’ll hit your loan volume goals. On top of that, if you’re seeking a better work/life balance, hiring great staff is the most critical place to start. 

So, when looking to support your team, be sure that you invest time and resources in each person. Also, provide them with advice and information on how to pass the NMLS exam and be the best loan officer they can be.

How is the NMLS exam formatted?

The exam is a standard format. It includes 100 computer-generated, multiple-choice questions that must have answers within three hours. Ten of the 100 questions are “test” questions that do not affect your grade. Of the remaining 90 questions, originators must achieve a passing score of 75% or better. 

A standardized test like the NMLS exam can carry a lot of pressure. After all, some people fail by only two or three points. If you fail, you must wait 30 days after each of your first four attempts to retake the test, and six months after that. 

But, there are ways to prepare for the NMLS exam so that you’re ready to ace it!

5 ways to prepare for the NMLS exam:

1. Master the Concepts

Within the exam, there is a database of nearly 4,000 possible questions that the examiners can pull from. You get 125 of these on test day. No matter how many times you take the test, you may not get the same questions. 

Therefore, master the concepts instead of just memorizing questions and answers. They could ask the same questions in multiple ways to check your comprehension, so prepare.

Although the test includes mortgage loan origination activities (25%), general mortgage knowledge (25%) and ethics (15%), most questions will involve federal mortgage-related laws (35%). So, it’s essential that you know the regulations. 

2. Answer Each Question

If you leave a question blank on the NMLS exam, you will earn zero on that question. So, it’s always better to guess instead of leaving a question blank. Who knows, maybe your “guess” is correct! After all, if you guess, you have a 25% chance of getting it correct.

3. Read Questions Twice

As mentioned above, a single concept can have nearly ten different questions tied to it. So, it is necessary to read every question twice. Take your time and do not rush through your exam. 

No matter how simple the questions seem, being sure that you thoroughly understand what’s being asked of you is key. So, plan to use all three hours. You may have colleagues who’ve bragged about how they finished the exam in an hour and a half, but take the time you need to succeed.

4. Study and Rest

The NMLS exam surely requires a fair amount of studying. Even if you’re familiar with the industry, do not skip this step. You may be a seasoned professional, but you still must study to avoid a false sense of security. After all, the test covers more than just your origination experience. 

When it comes to preparing for the exam, it is important to understand the components of the mortgage industry. Also, familiarize yourself with how these steps all come together to form the entire process. Everything works together, and this realization will help you solve for variables. 

Also, remember to rest the night before. Head to bed and sleep, so you’re fresh, alert, and ready to ace the NMLS exam the next day.

5. Use The Tutorial

This test is too important for you to miss a question or two because you didn’t know how to access the online calculator or how to go back to review a question. If your test offers a tutorial, take the time to go through it. It is worth preparing to avoid test-day mess-ups! 

Bottom Line

If you or your team members first don’t succeed when taking the exam, try again! Do not give up if you fail once. The NMLS exam is a passable test. Be sure to know what to study and how to approach it, and provide your team with this valuable advice as well.  

The reason some people fail the NMLS exam is that they don’t study, or panic when they do not understand a question, or read the questions too fast. 

Whether you are retaking the exam or are new to the industry and taking it for the first time, this test is extremely important to your career. So, prepare for it seriously, and support your team in doing so as well.