Finance
A Minnesota buyer is purchasing a multi-unit investment property with a commercial mortgage. Commercial lenders typically use which metric to evaluate the investment property's income potential?
AThe buyer's personal credit score only
BDebt Service Coverage Ratio (DSCR) and the property's NOI✓ Correct
CThe list-to-sale ratio of comparable sales
DThe property's assessed value for property tax purposes
Explanation
Commercial lenders in Minnesota evaluate investment properties using the Debt Service Coverage Ratio (DSCR) - the ratio of NOI to annual debt service. A DSCR above 1.0 means the property generates enough income to cover debt service. Most Minnesota commercial lenders require a minimum DSCR of 1.20-1.25. The property's income generation ability is central to commercial lending decisions.
Related Minnesota Finance Questions
- A Minnesota mortgage has a 'balloon payment' feature. This means:
- A Minnesota homebuyer is purchasing their first home for $250,000 and has excellent credit. Which loan type would likely offer the lowest interest rate?
- A Minnesota seller provides seller financing at an interest rate below the applicable federal rate (AFR). What tax consequence may occur?
- A Minnesota borrower's application discloses an undisclosed $450/month student loan payment that was not included in their original DTI calculation. The underwriter discovers this. What will happen?
- An assumable mortgage in Minnesota allows:
- A Minnesota property is in a designated Special Flood Hazard Area (SFHA). The lender requires the buyer to purchase:
- The Dodd-Frank Act's Ability-to-Repay (ATR) rule requires mortgage lenders to:
- Private mortgage insurance (PMI) is typically required when the buyer's down payment is:
Practice More Minnesota Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Minnesota Quiz →