MRP Financial Analysis for Properties 3 — Questions and Answers
Question 1: Under the Servicemembers Civil Relief Act (SCRA), what is the maximum interest rate a lender can charge on pre-service debts during active duty?
- 6% (Correct answer)
- 8%
- 3%
- No cap applies
Correct answer: 6%
The SCRA caps interest rates on pre-service obligations at 6% per year during active duty military service upon proper written notice.
Question 2: When analyzing a home purchase for a military buyer, which factor is MOST unique to their financial analysis compared to civilian buyers?
- Potential PCS relocation reducing planned holding period (Correct answer)
- Property tax rates
- HOA fee structures
- Mortgage insurance premiums
Correct answer: Potential PCS relocation reducing planned holding period
Military buyers face unpredictable PCS orders that can force a sale before achieving break-even on buying costs, making holding period analysis critical.
Question 3: A military member's monthly gross income is $5,500. Their proposed housing payment (PITI) is $1,540. What is their housing expense ratio?
- 28% (Correct answer)
- 31%
- 36%
- 43%
Correct answer: 28%
Housing expense ratio = $1,540 ÷ $5,500 = 0.28, or 28%, which is within conventional lending guidelines.
Question 4: A service member is considering converting their primary home to a rental upon PCS. Which calculation determines if the rental will cash flow positively?
- Monthly rent minus PITI and management fees (Correct answer)
- Purchase price divided by annual rent
- Appraised value minus outstanding loan balance
- BAH rate minus monthly mortgage
Correct answer: Monthly rent minus PITI and management fees
Positive cash flow exists when monthly rent exceeds all monthly expenses including mortgage payment, taxes, insurance, and management fees.
Question 5: In VA loan underwriting, what does the residual income requirement primarily assess?
- Whether sufficient funds remain for family living expenses after all obligations (Correct answer)
- The borrower's credit score adequacy
- The property's market value relative to loan amount
- The borrower's employment stability
Correct answer: Whether sufficient funds remain for family living expenses after all obligations
VA residual income measures the money left after all monthly debts and shelter expenses, ensuring the veteran's family can meet basic living needs.
Question 6: A property has a gross rent multiplier (GRM) of 120. The property sells for $240,000. What is the estimated monthly rent?
- $2,000 (Correct answer)
- $1,500
- $2,400
- $1,800
Correct answer: $2,000
Monthly Rent = Price ÷ GRM = $240,000 ÷ 120 = $2,000 per month.
Question 7: Which scenario would MOST likely result in a military homeowner facing negative equity upon PCS?
- Purchased at peak market with minimal down payment in a declining market (Correct answer)
- Used VA loan with no down payment in an appreciating market
- Made extra principal payments throughout ownership
- Bought in a market with strong military demand
Correct answer: Purchased at peak market with minimal down payment in a declining market
Buying at market peak with little equity cushion leaves no buffer when prices decline, creating negative equity that complicates selling during PCS.
MRP Financial Analysis for Properties 3
Under the Servicemembers Civil Relief Act (SCRA), what is the maximum interest rate a lender can charge on pre-service debts during active duty?