#1
What does LTV stand for in real estate financing?
Loan to Value
ExplanationIt represents the ratio of the loan amount to the appraised value of the property.
#2
What is a 'down payment' in the context of real estate financing?
An initial payment towards the purchase price of a property
ExplanationIt's the upfront payment made by the buyer as part of the property purchase.
#3
What is a 'jumbo loan' in real estate financing?
A loan exceeding the conforming loan limits set by Fannie Mae and Freddie Mac
ExplanationIt surpasses the loan limits established by government-sponsored enterprises.
#4
What is a 'lien' in the context of real estate?
A legal claim on a property as security for a debt
ExplanationIt's a legal right allowing a lender to seize the property if the borrower defaults.
#5
What is the purpose of a 'due diligence' period in a real estate transaction?
To allow the buyer to inspect the property and its documents before finalizing the purchase
ExplanationIt provides a window for thorough property investigation, reducing risks for the buyer.
#6
Which type of mortgage has a fixed interest rate and monthly payments that never change?
Fixed-Rate Mortgage
ExplanationIt provides consistent monthly payments, offering stability to borrowers.
#7
What is the role of a mortgage broker in real estate financing?
Connecting borrowers with lenders
ExplanationThey facilitate the mortgage process by linking borrowers with suitable lenders.
#8
What does the term 'equity' represent in real estate?
The difference between a property's value and outstanding mortgage debt
ExplanationIt's the owner's interest in a property, calculated as the property value minus remaining mortgage.
#9
What is Private Mortgage Insurance (PMI) commonly used for in real estate financing?
To protect lenders in case of borrower default
ExplanationIt safeguards lenders against financial loss if the borrower fails to repay the loan.
#10
What is the primary purpose of a real estate appraisal?
To determine the property's market value
ExplanationIt assesses the property's value, aiding in informed buying, selling, or financing decisions.
#11
In the context of real estate financing, what does the term 'closing costs' refer to?
The fees and expenses associated with finalizing a real estate transaction
ExplanationThese are the various charges incurred in completing a property sale or purchase.
#12
In real estate, what does the term 'amortization' refer to?
The gradual repayment of a loan over time
ExplanationIt involves paying off a loan through scheduled, periodic payments.
#13
What is the Debt Service Coverage Ratio (DSCR) used for in real estate financing?
To evaluate a property's income-generating ability
ExplanationIt assesses a property's ability to cover its debt obligations with operating income.
#14
What is a 'recourse loan' in real estate financing?
A loan secured by the borrower's personal assets
ExplanationIt allows the lender to seize personal assets if the borrower defaults on the loan.
#15
What role does the Federal Housing Administration (FHA) play in real estate financing?
Providing mortgage insurance and facilitating affordable home loans
ExplanationIt supports affordable homeownership by insuring mortgages and setting standards.
#16
What is the key characteristic of a 'construction loan' in real estate financing?
Designed for financing the construction of a new property
ExplanationIt specifically funds the building or renovation of a property.
#17
What is the role of Fannie Mae and Freddie Mac in the real estate market?
Buying and guaranteeing mortgages to provide liquidity to the housing market
ExplanationThey enhance the availability of mortgage funds by purchasing and guaranteeing loans.