Real Estate Investing Real Estate Investing Investment Property Financing Questions and Answers 2

Question 1

What is the typical minimum down payment percentage required for an investment property conventional loan?

Accepted Answer

25%

Answer

Most conventional lenders require a minimum 25% down payment for investment property purchases.

Question 2

Which loan metric compares a property's net operating income to its annual debt service payments?

Accepted Answer

Debt service coverage ratio

Answer

The debt service coverage ratio (DSCR) divides net operating income by total debt service to measure a property's ability to cover its loan payments.

Question 3

What is a blanket mortgage primarily used for in real estate investing?

Accepted Answer

Covering multiple properties under one loan

Answer

A blanket mortgage allows an investor to finance multiple properties under a single loan with one set of terms.

Question 4

Which type of financing allows investors to borrow against the increased equity in a property after renovations?

Accepted Answer

Cash-out refinance

Answer

A cash-out refinance replaces the existing mortgage with a larger one based on the property's new appraised value, giving the investor access to the equity gained.

Question 5

What does the term 'seasoning period' refer to in investment property financing?

Accepted Answer

The time required to hold a property before refinancing

Answer

A seasoning period is the minimum time a lender requires an investor to own a property before allowing a refinance, typically six to twelve months.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Real Estate Investing Investment Property Financing Questions and Answers 2