Finance
Which of the following loans is NOT generally subject to the rescission right under TILA?
AA home equity loan on a primary residence
BA purchase money mortgage for a primary residence✓ Correct
CA refinance of a primary residence
DA home equity line of credit on a primary residence
Explanation
TILA's right of rescission (3-business-day right to cancel) applies to non-purchase loans secured by the borrower's primary residence (refinances, HELOCs, home equity loans). It does NOT apply to purchase money mortgages used to buy a home.
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Key Terms to Know
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid 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.
Math Concepts
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