#1
What does LTV stand for in Real Estate Financing?
Loan to Value
ExplanationRatio of the mortgage amount to the appraised value of the property.
#2
What is a 'contingency' in a real estate contract?
A condition that must be met for the contract to proceed
ExplanationStipulation that must be fulfilled for the agreement to be binding.
#3
What is the Loan Origination Fee in real estate financing?
A fee paid by the borrower for processing the loan application
ExplanationCost for loan processing and application review.
#4
What is the Debt-Service Coverage Ratio (DSCR) in real estate finance?
The ratio of rental income to property expenses
ExplanationMeasure of property income against operating expenses.
#5
What is the 'depreciation' concept in real estate accounting?
A decrease in property value due to wear and tear
ExplanationReduction in property worth over time due to use.
#6
Which type of loan has a fixed interest rate for the entire loan term?
Fixed-Rate Mortgage
ExplanationInterest rate remains constant throughout the loan duration.
#7
What is the role of an escrow account in a real estate transaction?
To pay property taxes and insurance on behalf of the borrower
ExplanationHolds funds to cover property-related expenses.
#8
What is Private Mortgage Insurance (PMI) used for in real estate?
To protect the lender in case the borrower defaults on the loan
ExplanationInsurance coverage for the lender against borrower default.
#9
What does 'CAP rate' measure in real estate investment?
The potential return on investment based on property income
ExplanationIndicator of investment profitability based on property earnings.
#10
What is the role of a title company in a real estate transaction?
To ensure clear and legal ownership of the property
ExplanationVerification and guarantee of property ownership legality.
#11
What is the significance of the term 'earnest money' in a real estate deal?
A deposit made by the buyer to demonstrate seriousness of the offer
ExplanationInitial payment to show buyer's commitment to purchase.
#12
What is a 'due diligence' period in real estate transactions?
The time allowed for a buyer to inspect the property and cancel the contract if unsatisfied
ExplanationBuyer's opportunity to investigate the property.
#13
In real estate, what does the term 'amortization' refer to?
The gradual repayment of a mortgage through regular payments
ExplanationSystematic repayment of the loan principal.
#14
What is a '1031 exchange' in real estate?
A tax-deferred exchange of like-kind properties
ExplanationTax strategy allowing reinvestment of proceeds into similar properties.
#15
What is the primary purpose of a real estate appraisal?
To estimate the property's value for financing purposes
ExplanationAssessment of property value for loan qualification.
#16
In real estate, what does 'HUD-1 Settlement Statement' typically include?
Final terms and costs of the real estate transaction
ExplanationSummary of transaction details and closing costs.
#17
What is a 'wraps' mortgage in real estate financing?
A mortgage that includes both the primary loan and an additional loan
ExplanationSecondary loan encompassing the primary mortgage.