REAL ESTATE FINANCE FINAL EXAM QUESTIONS AND CORRECT ANSWER WITH EXPLANATION LATEST 2025 2026

REAL ESTATE FINANCE FINAL EXAM QUESTIONS AND
CORRECT ANSWER WITH EXPLANATION LATEST 2025-
2026
1.

A mortgage loan is best defined as:
A. A loan secured by real estate
B. A rental agreement
C. A tax document
D. An insurance policy
Answer: A
Rationale: A mortgage is real estate-secured debt.



2.

The borrower in a mortgage is called:
A. Mortgagor
B. Mortgagee
C. Trustee
D. Lender
Answer: A
Rationale: Borrower is the mortgagor.



3.

The lender in a mortgage is called:
A. Mortgagee
B. Mortgagor
C. Tenant
D. Appraiser
Answer: A
Rationale: Lender holds the mortgage.



4.

,Principal refers to:
A. Original loan amount
B. Interest paid
C. Taxes owed
D. Insurance premium
Answer: A
Rationale: Base amount borrowed.



5.

Interest is:
A. Cost of borrowing money
B. Property tax
C. Insurance fee
D. Maintenance cost
Answer: A
Rationale: Payment for using borrowed funds.



6.

Amortization means:
A. Gradual loan repayment over time
B. Loan increase
C. Interest cancellation
D. Tax reduction
Answer: A
Rationale: Structured repayment schedule.



7.

A fixed-rate mortgage has:
A. Constant interest rate
B. Changing interest rate
C. No interest
D. Variable taxes
Answer: A
Rationale: Rate remains stable.

, 8.

An adjustable-rate mortgage (ARM):
A. Changes interest rate over time
B. Has fixed rate always
C. Has no interest
D. Is tax-free
Answer: A
Rationale: Rate adjusts with market.



9.

Loan-to-value ratio (LTV) is:
A. Loan amount ÷ property value
B. Income ÷ expenses
C. Taxes ÷ rent
D. Equity ÷ loan
Answer: A
Rationale: Measures lending risk.



10.

Higher LTV indicates:
A. Higher risk
B. Lower risk
C. No risk
D. Guaranteed approval
Answer: A
Rationale: More leverage increases risk.



11.

Equity is:
A. Ownership interest in property
B. Loan amount
C. Interest rate