#1
Which financing instrument is a type of loan where the borrower receives a lump sum upfront and pays back a fixed amount over a specified term?
Balloon mortgage
ExplanationFixed lump sum loan with repayments over a term.
#2
What is a Real Estate Investment Trust (REIT) primarily designed to do?
Invest in real estate properties and distribute rental income to investors
ExplanationVehicle investing in real estate, distributing rental income.
#3
What is the primary function of a real estate appraiser?
To estimate the market value of a property
ExplanationTasked with determining property market value.
#4
What is the primary purpose of a Home Equity Line of Credit (HELOC) in real estate financing?
To allow homeowners to borrow against the equity in their property
ExplanationFacility enabling borrowing against property equity.
#5
What is the purpose of a 1031 Exchange in real estate?
To defer capital gains taxes on the sale of an investment property
ExplanationDefers capital gains tax on investment property sale.
#6
What is Private Mortgage Insurance (PMI) commonly used for in real estate financing?
To protect the lender in case of borrower default
ExplanationInsurance safeguarding lenders from borrower default.
#7
Which of the following is a government-sponsored enterprise (GSE) that plays a crucial role in the secondary mortgage market?
Fannie Mae
ExplanationKey GSE facilitating secondary mortgage market.
#8
Which of the following is an example of a non-recourse loan in real estate financing?
Reverse mortgage
ExplanationLoan where only property serves as collateral.
#9
What is the purpose of a 'due diligence' period in real estate transactions?
To thoroughly investigate the property before finalizing the deal
ExplanationPeriod for comprehensive property investigation pre-deal.
#10
What does the term 'recourse' mean in the context of real estate financing?
A loan that requires personal liability for repayment
ExplanationLoan with personal liability for repayment.
#11
What does the term 'loan-to-value ratio (LTV)' represent in real estate financing?
The ratio of the loan amount to the property's appraised value
ExplanationRatio showing loan amount relative to property value.
#12
In real estate financing, what does the term 'amortization' refer to?
The gradual repayment of a loan through regular installments
ExplanationGradual loan repayment via periodic installments.
#13
In real estate, what does the term 'cap rate' (capitalization rate) represent?
The rate of return on an investment property based on its income
ExplanationRate of return based on property income.
#14
What is the main purpose of a construction loan in real estate financing?
To fund the construction or renovation of a property
ExplanationLoan to finance property construction or renovation.
#15
In real estate financing, what is the purpose of a 'deed of trust'?
To secure the loan with the property as collateral
ExplanationSecures loan with property as collateral.