Contracts
A contract clause that makes the buyer's obligation contingent on obtaining a mortgage is called a:
AAcceleration clause
BFinancing contingency (mortgage contingency)✓ Correct
CSubordination clause
DDefeasance clause
Explanation
A financing contingency (mortgage contingency) makes the buyer's obligation to purchase contingent on obtaining a mortgage under specified terms. If the buyer cannot obtain financing, they may terminate and recover their earnest money.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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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