QUICK ANSWER
Financing and Settlement is one of the eight national content areas on the Texas exam. It covers how buyers pay for property and how deals close. The eight topics to master are the types of loans, the note and deed of trust, Texas foreclosure, the federal lending laws, the Closing Disclosure and TRID, loan clauses and Texas usury, mortgage insurance, and the secondary mortgage market. This guide orients you to all eight and links to a full breakdown of each.
EXAM PREP ONLY
This is a study guide for the Texas sales agent exam. It is educational content, not legal or lending advice. The rules referenced here come from federal law and the Texas Property Code, Finance Code, Constitution, and CFPB regulations, which can change. Confirm the current law before relying on it, and see each linked guide for its primary sources.
This area answers one question from many angles: how does a buyer pay for property, and what happens from the loan to the closing table? Most of it is national concepts, but Texas adds strong flavor through its deed of trust, non-judicial foreclosure, usury limits, and home-equity protections. Learn the eight pieces below, then drill them in financing and settlement practice questions.
The area at a glance
Snippet answer: This area covers eight topics. Loan types and the loan instruments explain how financing is structured. Texas foreclosure and loan clauses cover what happens on default. Federal lending laws and the Closing Disclosure govern the process. Mortgage insurance and the secondary market round out the money side. Several topics carry Texas-specific rules that national guides miss.
| Topic | What it covers |
|---|---|
| Types of mortgages and loans | Conventional, FHA, VA, USDA, and fixed vs adjustable |
| Note, mortgage, and deed of trust | The debt vs the security, and the parties |
| Deed of trust and foreclosure | Power of sale, first-Tuesday sale, no redemption |
| Federal lending laws | RESPA, TILA and Reg Z, and ECOA |
| Closing Disclosure and TRID | The two forms, the 3-day rules, and closing costs |
| Loan clauses and Texas usury | Acceleration, due-on-sale, and Texas home-equity limits |
| Mortgage insurance | PMI, FHA MIP, the VA fee, and USDA fee |
| Secondary mortgage market | Fannie Mae, Freddie Mac, and Ginnie Mae |
Loan types and the loan instruments
Snippet answer: Loans split into conventional and government-backed (FHA, VA, USDA), each either fixed-rate or adjustable-rate. Every loan uses two documents: the promissory note, which is the debt, and the security instrument, which pledges the property. In Texas, the security instrument is a deed of trust, a three-party document with a trustee, rather than a two-party mortgage.
Start with what a loan is and how it is documented. The types of mortgages and loans sort into conventional and the three government programs, and each is fixed or adjustable. Then the note and deed of trust spoke splits the paperwork: the note is the promise to pay, and the deed of trust is the collateral. Texas uses a deed of trust with a trustee, which sets up its fast foreclosure.
Texas foreclosure
Snippet answer: Because a Texas deed of trust has a power-of-sale clause, foreclosure is non-judicial, with no lawsuit. The sale happens on the first Tuesday of the month at the county courthouse. After an ordinary foreclosure, Texas gives no right of redemption. Home-equity loans are the exception and require a court order to foreclose. This is the most Texas-specific corner of the area.
This is where Texas differs most from other states. The deed of trust and non-judicial foreclosure spoke covers the power of sale, the first-Tuesday auction, and the no-redemption rule, plus the home-equity court-order exception. The Texas foreclosure and short sales guide adds the full timeline and short-sale details.
The federal lending laws
Snippet answer: Three federal laws govern lending. RESPA covers settlement costs and bans kickbacks. TILA, through Regulation Z, requires disclosure of the cost of credit and gives a three-day rescission on refinances but not purchases. ECOA, through Regulation B, bans discrimination in credit. Pair each with its regulation, and know their signature rules.
These are pure memorization, so give each a label. The federal lending laws spoke covers RESPA for settlement and kickbacks, TILA for cost-of-credit disclosure and the three-day rescission, and ECOA for fair access to credit. The reg letters pair up as X, Z, and B, and all three are enforced by the CFPB.
The Closing Disclosure and TRID
Snippet answer: TRID merged the old disclosures into two forms. The Loan Estimate must reach the borrower within three business days of application, and the Closing Disclosure at least three business days before closing. Only three changes reset that clock: an inaccurate APR, a changed loan product, or an added prepayment penalty. In Texas, a title company handles the closing.
The Closing Disclosure and TRID spoke covers the two forms and their mirror-image timing, plus the three changes that reset the three-day clock. It also covers debits and credits at closing and the Texas custom that a title company runs the closing and prorates taxes paid in arrears.
This area rewards drilling the Texas-specific rules. Run the free financing and settlement question set and check your instincts against the answer rationales.
Loan clauses and Texas usury
Snippet answer: Loan clauses are triggered by events: acceleration on default, due-on-sale on transfer, prepayment on early payoff, defeasance on full payment. Texas adds usury limits, with a 10 percent constitutional default cap, and strong home-equity protections: an 80 percent cap, non-recourse treatment, and no prepayment penalty. These home-equity rules make Texas lending distinctive.
The loan clauses and Texas usury spoke matches each clause to its trigger, then layers on the Texas rules. Usury caps interest at a 10 percent constitutional default, and home-equity loans get an 80 percent cap, non-recourse protection, and no prepayment penalty. These tie back to the court-order foreclosure rule from the foreclosure spoke.
Mortgage insurance
Snippet answer: Mortgage insurance protects the lender, not the borrower, and it applies when the down payment is small. Conventional loans use PMI, which cancels as equity builds. FHA loans use MIP, which often lasts the life of a low-down loan. VA loans charge a one-time funding fee with no monthly insurance, and USDA loans charge a guarantee fee.
The single most tested point is that mortgage insurance protects the lender, not the buyer. The spoke covers PMI on conventional loans, cancellable at 80 and 78 percent, and FHA MIP that often lasts the loan's life. It also covers the one-time VA funding fee and the USDA guarantee fee.
The secondary mortgage market
Snippet answer: The primary market is where loans are made, and the secondary market is where they are sold to investors, which gives lenders liquidity to lend again. Fannie Mae and Freddie Mac are government-sponsored enterprises that buy conventional loans. Ginnie Mae is a full government agency that does not buy loans but guarantees securities backed by FHA, VA, and USDA loans.
The secondary mortgage market spoke explains why loans are sold after closing, the liquidity that results, and the three big players. Keep the contrast clear: Fannie and Freddie buy conventional loans, while Ginnie Mae guarantees securities backed by government loans.
How to study this area
Snippet answer: Study in order: learn the loan types and instruments first, then Texas foreclosure, then the federal laws and closing process, then the money topics of mortgage insurance and the secondary market. Focus your Texas energy on the deed of trust, non-judicial foreclosure, usury, and home-equity rules, since those are the details national guides miss and the exam rewards.
A simple sequence works. First learn the loans and their two documents. Second learn what happens on default, through Texas foreclosure and loan clauses. Third learn the process rules, the federal laws and the closing forms. Fourth learn the money side, mortgage insurance and the secondary market. Give extra attention to the Texas-specific rules, then test yourself in the free practice test and the app.
Original practice questions
Use these to check yourself. They span the area and are not copied from any real exam.
Question 1. A Texas lender forecloses on an ordinary home loan through a trustee's sale. How long does the former owner have to redeem the property?
- A) Two years
- B) 180 days
- C) 30 days
- D) There is no right of redemption
Answer: D. After an ordinary Texas deed-of-trust foreclosure, there is no right of redemption. The two-year and 180-day periods apply only to property-tax and HOA assessment foreclosures. (Original question.)
Question 2. A homeowner refinances their primary residence. Under TILA, they generally have how long to rescind?
- A) No right to cancel
- B) Three business days
- C) Ten days
- D) Thirty days
Answer: B. A refinance on a primary residence carries a three-business-day right of rescission under TILA. A purchase loan does not, but this is a refinance. (Original question.)
Question 3. Which secondary-market entity does not buy loans but guarantees securities backed by FHA and VA loans?
- A) Fannie Mae
- B) Freddie Mac
- C) Ginnie Mae
- D) The FHFA
Answer: C. Ginnie Mae, a government corporation in HUD, guarantees securities backed by government loans and does not buy loans. Fannie and Freddie buy conventional loans, and the FHFA is the regulator. (Original question.)
Frequently Asked Questions
For quick answers to every common Texas exam question, see the Texas real estate exam FAQ.
What topics are in the Financing and Settlement area?
Eight: the types of loans, the note and deed of trust, Texas foreclosure, the federal lending laws, the Closing Disclosure and TRID, loan clauses and Texas usury, mortgage insurance, and the secondary mortgage market. Together they cover how buyers finance property and how deals close.
How important is this area on the Texas exam?
It is one of the eight national content areas. The national portion has 80 scored items, and you need 56 correct to pass it. Financing concepts also blend into contracts and math questions, so the ideas show up more often than their raw item count suggests.
What are the most Texas-specific points in this area?
Several stand out. Texas uses a deed of trust with a power of sale for non-judicial foreclosure, the sale is the first Tuesday of the month, and there is no redemption after an ordinary foreclosure. Home-equity loans require a court order and carry an 80 percent cap with no prepayment penalty, usury has a 10 percent constitutional default, and a title company handles the closing. These are the details national study guides often miss.
What is the difference between the primary and secondary mortgage markets?
The primary market is where loans are originated, between a borrower and a lender. The secondary market is where those loans are bought and sold among investors, which gives lenders liquidity to make more loans. A borrower deals only with the primary market, while the lender often sells the loan into the secondary market after closing.
DRILL THE WHOLE AREA
Eight topics, one study system.
Pass Texas has topic practice for the entire financing and settlement area, with explanations that show why each answer is right and a readiness check that tells you when you are ready. Native Texas exam prep. Original questions. No copied exam questions. Not affiliated with TREC or Pearson VUE. Not a 180-hour pre-license course or a pass guarantee.
Sources and Methodology
This guide was reviewed on July 21, 2026. It summarizes the Financing and Settlement topics for the Texas sales agent exam and links to a full, separately sourced guide for each one. The exam structure, that the national portion has 80 scored items and requires 56 correct to pass, reflects the Pearson VUE Texas Real Estate Candidate Handbook and the national content outline. The Texas rules referenced in the summaries come from the Texas Property Code, including the §51.002 foreclosure provisions, the Texas Finance Code and Constitution on usury and home-equity lending, and federal law including RESPA, TILA, ECOA, and the TRID rule enforced by the CFPB, and each is cited in full in the linked guide for that topic. Statutes, rules, and exam materials can change, so verify the current sources before relying on any point in practice.
Official Source Links
- Pearson VUE Texas Real Estate Candidate Handbook
- Texas Property Code §51.002, Foreclosure Sale
- Texas Constitution, Article XVI, Section 50 (Homestead and Home Equity)
- CFPB, Mortgage Rules and Resources
This post is educational content for Texas real estate sales agent candidates. It is not legal, lending, or tax advice. Each topic in this area carries consequences that depend on individual facts and current law, so confirm the current federal and Texas sources and consult a licensed professional before you rely on any point in a real transaction.