Finance
A due-on-sale clause in a mortgage requires the borrower to:
AMake a balloon payment at the end of 5 years
BPay off the loan in full when the property is sold or transferred✓ Correct
CIncrease payments if interest rates rise above the note rate
DObtain the lender's written approval before making improvements
Explanation
A due-on-sale (acceleration) clause triggers when ownership is transferred, requiring the full loan balance to be repaid immediately. This prevents buyers from assuming loans without lender approval.
People Also Study
Related Arkansas Questions
- A borrower earns $95,000 annually. Lender requires a maximum back-end ratio of 43%. The borrower has monthly car and student loan payments totaling $800. What is the maximum monthly mortgage payment (PITI)?Real Estate Math
- An acceleration clause in a mortgage allows the lender to:Finance
- The primary risk to a buyer of assuming a mortgage with a 'due-on-sale' clause is:Finance
- A mortgage that requires only interest payments for an initial period, after which the full principal becomes due, is known as a:Finance
- A buyer assumes the seller's existing mortgage. The buyer is now primarily liable for the loan, but if the lender did not release the seller, the seller's exposure is described as:Finance
- An annual mortgage payment is $18,000. The outstanding loan balance is $200,000. What is the debt service coverage ratio (DSCR) if NOI is $25,000?Real Estate Math
- A buyer's gross monthly income is $6,500. The lender allows a back-end ratio of 43%. The buyer's monthly car payment is $350, and student loans cost $200/month. What is the maximum monthly mortgage payment (PITI) allowed?Real Estate Math
- If a licensee holds a concurrent license as both a real estate salesperson and a mortgage loan originator (MLO), AREC requires the licensee to:Arkansas License Law
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.
Promissory NoteA written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Math Concepts
Study This Topic
Practice More Arkansas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arkansas Quiz →