15 Real Estate Exam Questions on Alternative Financing - You need to know these questions!

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1. What is the key feature of a graduated-payment mortgage (GPM)?
a) Payments are fixed throughout the loan term
b) Payments decrease over time
c) Payments start low and increase at scheduled intervals
d) Payments vary based on market rates

Answer: c) Payments start low and increase at scheduled intervals
Explanation: A GPM allows borrowers to start with lower payments that gradually increase, typically used by borrowers expecting income growth.

2. A bridge loan is typically used:
a) To purchase investment properties only
b) Between the sale of one property and the purchase of another
c) For long-term financing of commercial real estate
d) When refinancing a mortgage

Answer: b) Between the sale of one property and the purchase of another
Explanation: A bridge loan provides temporary financing to "bridge" the gap between two transactions, like selling a home and buying a new one.

3. A blanket mortgage covers:
a) A single residential property
b) Multiple properties under one loan
c) Only commercial properties
d) A property and the homeowner's vehicle

Answer: b) Multiple properties under one loan
Explanation: Blanket mortgages are used by developers or investors who are financing more than one parcel of real estate.

4. What is typically required before a construction mortgage can be converted to a permanent loan?
a) Property must be rented out
b) All contractors must be paid in full
c) Construction must be completed and inspected
d) The borrower must refinance

Answer: c) Construction must be completed and inspected
Explanation: Construction loans are short-term and convert to permanent loans after completion and inspection of the structure.

5. What characterizes a subprime loan?
a) It is backed by the government
b) Offered to borrowers with excellent credit
c) Higher interest rates due to increased risk
d) Fixed interest rate for the full term

Answer: c) Higher interest rates due to increased risk
Explanation: Subprime loans are designed for borrowers with poor credit histories and usually come with higher interest rates.

6. A purchase-money mortgage is used when:
a) A buyer pays the full purchase price in cash
b) The seller finances part or all of the sale
c) The buyer gets a home equity line of credit
d) The buyer assumes the seller’s existing mortgage

Answer: b) The seller finances part or all of the sale
Explanation: In a purchase-money mortgage, the seller provides financing directly to the buyer, often when traditional loans aren’t possible.


graduated-payment loan

bridge loan

blanket mortgage

construction mortgage

subprime loan

purchase-money mortgage

wraparound mortgage