FinanceIntermediateAlabama Exam

A 'no-closing-cost' loan typically means:

AThe lender waives all fees for qualified borrowers, though specifics can vary by situation

BThe closing costs are rolled into the loan balance or paid through a higher interest rateCorrect

CThe seller must pay all closing costs

DGovernment subsidizes the closing costs

Why The closing costs are rolled into the loan balance or paid through a higher interest rate Is Correct

Answer B: The closing costs are rolled into the loan balance or paid through a higher interest rate

A no-closing-cost loan either rolls the closing costs into the loan balance (increasing the loan amount) or offers a higher interest rate in exchange for the lender paying the closing costs.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Closing Costs

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

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Key Terms to Know

Closing Costs

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

Discount Points

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

Math Concepts

Interest Rate Closing Costs

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