Finance
An Arizona 'wraparound mortgage' requires the seller to:
APay off the underlying mortgage immediately
BContinue making payments on the underlying (first) mortgage while collecting payments from the buyer on the larger wrap-around loan✓ Correct
CTransfer the underlying mortgage to the buyer
DObtain lender approval for the wrap arrangement
Explanation
In a wraparound, the seller (wraparound lender) collects payments from the buyer on the total wrapped amount and uses part of those payments to continue servicing the underlying first mortgage, retaining the spread as income.
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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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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