Mortgage Loan Originator (MLO) Licensing Practice Test 2026 – Your All-in-One Guide to Exam Success!

Question: 1 / 605

For what purpose can a promissory note be used in a mortgage?

To transfer property ownership

To confirm the loan agreement

To specify loan payment terms

A promissory note serves as a legally binding document that outlines the borrower's commitment to repay a loan. Specifically, it details the loan amount, interest rate, repayment schedule, and any conditions relevant to the loan. While confirming the loan agreement, it does not by itself transfer property ownership; that function is handled through other documents, such as the mortgage deed.

Therefore, specifying the loan payment terms is indeed a primary purpose of a promissory note, as it ensures both parties (the lender and the borrower) have a clear understanding of the financial obligations involved. This explicit delineation of the payment structure helps to avoid misunderstandings throughout the term of the loan.

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