Real Estate Investing Investment Property Financing 4

Question 1

What is the maximum number of financed properties Fannie Mae allows a single investor to have while still qualifying for conventional financing?

Accepted Answer

10

Answer

Fannie Mae allows investors to finance up to 10 properties simultaneously, though requirements become stricter after the 4th financed property.

Question 2

When a lender 'impounds' taxes and insurance on an investment property loan, it means:

Accepted Answer

Monthly payments include a portion held in escrow for tax and insurance bills

Answer

Impound (escrow) accounts collect monthly installments alongside the mortgage payment so the lender can pay property taxes and insurance when due.

Question 3

Which financing structure is MOST appropriate for an investor purchasing a 12-unit apartment building?

Accepted Answer

Commercial multifamily loan

Answer

Properties with 5+ units are classified as commercial real estate and require commercial multifamily financing rather than residential loans.

Question 4

What is 'cross-collateralization' in investment property financing?

Accepted Answer

Using one property's equity as collateral for a loan on a different property

Answer

Cross-collateralization links multiple properties as security for a single loan, meaning a default on one loan could put all pledged properties at risk.

Question 5

An investor is considering a 5/1 ARM for a rental property. What happens after the initial 5-year period?

Accepted Answer

The rate adjusts annually based on a benchmark index plus a margin

Answer

After the 5-year fixed period, a 5/1 ARM adjusts the interest rate every year based on a market index (e.g., SOFR) plus the lender's margin.

Real Estate Investing Practice Test

Real Estate Investing Practice Test

Real Estate Investing Investment Property Financing 4