Humber/Ontario Real Estate Course 3 Exam Practice

A buyer intending to view properties and obtain mortgage financing should be aware that:

1. A credit check is required prior to viewing any property.

2. A downpayment of at least 25% of the selling price is necessary.

3. A mortgage application must be completed before any property viewings.

4. The maximum mortgage amount can be influenced by the property's location, type, and value.

5. They must secure financing before making any home visits.

6. They are restricted to certain neighborhoods based on mortgage pre-approval.

The correct answer is: The maximum mortgage amount can be influenced by the property's location, type, and value.

Understanding mortgage financing involves recognizing various factors that influence the amount a buyer can borrow. The correct answer highlights that the maximum mortgage amount is indeed influenced by several important variables, including the property's location, type, and value. Lenders assess these factors to gauge the risk associated with a loan. For instance, properties in more desirable neighborhoods or those with greater market value may allow for higher mortgage amounts due to their potential for appreciation and lower risk. Location plays a critical role; properties in stable or high-demand areas may result in increased loan approvals and amounts because they are generally considered safer investments. Similarly, the property type—commercial, residential, or multifamily—affects how lenders evaluate the asset's cash flow potential and risk level. Lastly, the intrinsic value of the property is a determining factor in how much financial backing a buyer can receive, as lenders will not typically finance more than the property's assessed market value. This understanding of factors influencing mortgage amounts is vital for buyers as they navigate the real estate market and plan their budgets accordingly. The other options suggest requirements or restrictions that are not standard practices or may not apply to every buyer, making them less relevant in the broader context of obtaining a mortgage.