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 is best defined as:
A. A loan secured by real property
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. Appraiser
Answer: A
Rationale: Mortgagor is the borrower.



3.

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



4.

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



5.

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



6.

Amortization means:
A. Gradual repayment of loan over time
B. Loan increase
C. Interest cancellation
D. Tax reduction
Answer: A
Rationale: Scheduled repayment of principal and interest.



7.

A fixed-rate mortgage has:
A. Constant interest rate
B. Variable rate
C. No interest
D. Tax-based rate
Answer: A
Rationale: Rate does not change.

, 8.

An adjustable-rate mortgage (ARM):
A. Changes interest rate periodically
B. Has fixed interest
C. No interest charged
D. Is tax-based
Answer: A
Rationale: Rate adjusts with market index.



9.

Loan-to-value (LTV) ratio is:
A. Loan amount ÷ property value
B. Income ÷ taxes
C. Equity ÷ interest
D. Rent ÷ 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 borrowing relative to value increases risk.



11.

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