Finance
An Alaska buyer assumes an existing mortgage. Which statement is TRUE about mortgage assumption?
AThe original borrower is automatically released from liability
BThe buyer takes over the seller's existing mortgage terms✓ Correct
CThe lender must provide a new Loan Estimate
DOnly FHA loans can be assumed in Alaska
Explanation
In a mortgage assumption, the buyer takes over the seller's existing loan at its current terms (interest rate, balance, remaining term). The original borrower may remain liable unless the lender grants a novation releasing them.
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Key Terms to Know
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe 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
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