Finance
A Delaware buyer obtains a 30-year fixed-rate mortgage at 7% interest for $250,000. The 'fixed-rate' means:
AThe payment amount never changes
BThe interest rate remains constant for the life of the loan✓ Correct
CThe loan term is fixed and cannot be extended
DThe property tax is included at a fixed rate
Explanation
A fixed-rate mortgage maintains the same interest rate for the entire loan term, providing payment stability. Monthly payments can still change if property taxes or insurance held in escrow change.
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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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