Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 1

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What is a key disadvantage of government-sponsored loans?

Higher interest rates
Less flexibility in terms
Additional requirements for the borrower
No interest accrual

The correct answer is: Additional requirements for the borrower

Government-sponsored loans often come with additional requirements for the borrower, which is a key disadvantage. These loans typically have stringent criteria that must be met to qualify. For instance, borrowers may need to demonstrate specific financial documentation, income limits, or credit standards that can complicate the borrowing process. This can result in obstacles for potential homeowners or property investors who may find the application and approval process more cumbersome compared to private loans that might offer more straightforward requirements. While higher interest rates, less flexibility in terms, and no interest accrual could be considerations in certain contexts, they do not universally apply to all government-sponsored loans. Some programs may even provide favorable interest rates or flexible repayment terms to encourage homeownership, making the additional borrower requirements a more consistently relevant disadvantage for most applicants.