Finance
What is a 'due-on-sale' clause in a mortgage?
AThe loan must be paid off if property taxes become delinquent
BThe full loan balance becomes due upon sale or transfer of the property✓ Correct
CThe seller must pay points at closing
DThe buyer must assume the mortgage within 60 days
Explanation
A due-on-sale (acceleration) clause requires the entire loan balance to be paid when the property is sold or transferred. It prevents buyers from assuming the loan without lender approval.
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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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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.
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