Finance
What is the primary purpose of the Real Estate Settlement Procedures Act (RESPA)?
ATo set maximum interest rates on mortgage loans
BTo require disclosure of closing costs and prohibit kickbacks in settlement services✓ Correct
CTo guarantee mortgage loans for low-income buyers
DTo regulate appraisal standards nationwide
Explanation
RESPA requires lenders to provide borrowers with disclosures about closing costs and prohibits kickbacks and unearned fees among settlement service providers, protecting consumers in the home purchase process.
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Key Terms to Know
Closing Costs
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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