Real Estate Investing Real Estate Investing Real Estate Financing Methods Questions and Answers 2

Question 1

Which financing method allows a buyer to assume the seller's existing mortgage terms instead of obtaining a new loan?

Accepted Answer

Subject-to financing

Answer

Subject-to financing lets a buyer take over the seller's existing mortgage while the loan remains in the seller's name.

Question 2

What is the primary advantage of seller financing for a real estate investor?

Accepted Answer

Bypassing traditional lender qualification requirements

Answer

Seller financing allows buyers who may not qualify for conventional loans to negotiate terms directly with the property owner.

Question 3

In a blanket mortgage, what clause allows a borrower to sell individual parcels without triggering full loan repayment?

Accepted Answer

Partial release clause

Answer

A partial release clause permits the borrower to free individual properties from the blanket lien as portions of the debt are repaid.

Question 4

What distinguishes mezzanine financing from a traditional second mortgage in commercial real estate?

Accepted Answer

Mezzanine debt is secured by an ownership interest in the borrowing entity rather than the property itself

Answer

Mezzanine financing is secured by a pledge of the borrower's equity interest in the entity that owns the property, not by a lien on the real estate.

Question 5

Which government-backed loan program is specifically designed for purchasing properties with up to four units where the buyer occupies one unit?

Accepted Answer

FHA loan

Answer

FHA loans allow owner-occupants to purchase properties with one to four units with low down payments and flexible qualification criteria.

Real Estate Investing Practice Test