FinanceIntermediateCalifornia Exam

A purchase-money mortgage is:

AA mortgage taken out before purchasing a property

BSeller financing where the seller acts as the lenderCorrect

CA government-backed loan for first-time buyers

DA loan used exclusively for investment properties

Why Seller financing where the seller acts as the lender Is Correct

Answer B: Seller financing where the seller acts as the lender

A purchase-money mortgage is seller financing where the seller extends credit to the buyer, typically shown as a note secured by a deed of trust. It is used when the buyer cannot obtain traditional bank financing.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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Key Terms to Know

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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.