#1
Which type of loan typically has a fixed interest rate throughout the loan term?
Fixed-rate mortgage
ExplanationMaintains a constant interest rate for the entire loan duration.
#2
What does LTV stand for in real estate financing?
Loan to Value
ExplanationRatio of the loan amount to the property's appraised value, expressed as a percentage.
#3
In real estate, what is PMI designed to protect against?
Private Mortgage Insurance
ExplanationCovers the lender in case the borrower defaults on a mortgage, reducing the risk of financial loss.
#4
What is the debt-to-income ratio used for in the context of real estate financing?
Determining loan eligibility
ExplanationAssesses a borrower's ability to manage monthly mortgage payments based on their income.
#5
What is the purpose of a bridge loan in real estate financing?
To provide temporary financing until permanent financing is secured
ExplanationCovers short-term financial needs until a long-term solution is in place.
#6
In real estate, what is the role of an appraiser?
To assess the market value of a property
ExplanationDetermines the fair market value of a property based on various factors.
#7
What is the role of a title company in a real estate transaction?
Ensuring a clear title and facilitating the closing process
ExplanationVerifies property ownership and facilitates the smooth closing of real estate transactions.
#8
What does the term 'escrow' mean in real estate?
A special account for holding funds during a real estate transaction
ExplanationSecure account holding funds and documents until the completion of a real estate transaction.
#9
Which of the following is a type of government-backed loan program in the United States?
FHA loan
ExplanationInsured by the Federal Housing Administration, providing benefits to qualified borrowers.
#10
What does the term 'amortization' refer to in the context of real estate financing?
The gradual repayment of a loan through periodic installments
ExplanationPaying off a loan over time with regular, structured payments.
#11
Which type of loan may be suitable for a borrower with a fluctuating income, such as a commission-based salesperson?
Adjustable-rate mortgage (ARM)
ExplanationInterest rates may vary, accommodating income fluctuations.
#12
What is a prepayment penalty in the context of real estate financing?
A fee charged for paying off a loan before the scheduled due date
ExplanationPenalty fee imposed for early loan repayment, discouraging prepayment.
#13
What is the primary purpose of a home inspection during the home buying process?
To identify potential issues or defects in the property
ExplanationThorough examination to discover any problems or defects in the property.
#14
In real estate, what is the difference between a leasehold and a freehold property?
The duration of ownership rights
ExplanationLeasehold has limited rights for a specific duration, while freehold allows ownership indefinitely.