Real Estate Financing Methods Flashcards
7 cards from real Real Estate Investing practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Real Estate Financing Methods flashcards as text
What is a 'blanket mortgage' used for in real estate investing?
Answer: Covering multiple properties under one loan
A blanket mortgage covers multiple properties under a single loan, commonly used by developers and investors acquiring several properties at once.
In a seller carryback arrangement, who acts as the lender?
Answer: The property seller
In a seller carryback (also called owner financing), the seller extends credit to the buyer, essentially acting as the lender.
What does LTV stand for in real estate financing?
Answer: Loan-to-Value
LTV (Loan-to-Value) is the ratio of the loan amount to the appraised value of the property, used by lenders to assess risk.
Which loan type allows investors to use equity in existing properties to fund new purchases?
Answer: Home Equity Line of Credit (HELOC)
A HELOC allows investors to borrow against the equity built in existing properties to fund additional real estate purchases.
What is the primary advantage of an adjustable-rate mortgage (ARM) for a short-term investor?
Answer: Lower initial interest rate during the introductory period
ARMs offer a lower initial rate during the introductory period, which benefits short-term investors who plan to sell before the rate adjusts.
A 'subject-to' financing deal means the buyer:
Answer: Takes ownership while the seller's existing mortgage stays in place
In a subject-to deal, the buyer takes title to the property subject to the existing mortgage, which remains in the seller's name.
What is a debt service coverage ratio (DSCR) loan primarily based on?
Answer: The property's income relative to its debt obligations
DSCR loans qualify borrowers based on the property's rental income relative to its debt obligations, not the borrower's personal income.
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