Real Estate Investing Investment Property Financing 2

Question 1

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

Accepted Answer

20%

Answer

Conventional lenders typically require at least 20% down for investment properties, compared to 3-5% for primary residences.

Question 2

A DSCR (Debt Service Coverage Ratio) loan qualifies borrowers primarily based on:

Accepted Answer

The property's rental income relative to its debt payments

Answer

DSCR loans evaluate whether the property's rental income is sufficient to cover the mortgage payment, making them ideal for self-employed investors.

Question 3

Which loan type is BEST suited for an investor who wants to purchase, renovate, and quickly sell a property?

Accepted Answer

Hard money loan

Answer

Hard money loans offer fast funding and short terms (6-24 months), making them ideal for fix-and-flip projects despite their higher interest rates.

Question 4

What does it mean when a lender 'calls' a loan?

Accepted Answer

They require the full balance to be repaid immediately

Answer

A loan call provision allows the lender to demand full repayment of the outstanding balance before the loan's maturity date.

Question 5

An investor uses a blanket mortgage to:

Accepted Answer

Secure multiple properties under one loan

Answer

A blanket mortgage covers multiple properties under a single loan, simplifying financing for portfolio investors.

Real Estate Investing Practice Test