A Colorado buyer who is told by a lender that the loan has a 'prepayment penalty' should be aware that:
Why B. They may be charged a fee for paying off the loan before a specified date, which could affect refinancing or sale decisions Is Correct
Answer B: B. They may be charged a fee for paying off the loan before a specified date, which could affect refinancing or sale decisions
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.
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Key Terms to Know
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.
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.
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