Finance
A seller who finances the buyer's purchase directly holds a:
AConventional first mortgage
BPurchase money mortgage (seller-held mortgage)✓ Correct
CConstruction loan
DBridge loan
Explanation
When a seller provides financing to the buyer, the resulting mortgage is called a purchase money mortgage. The seller acts as the lender and the buyer makes payments directly to the seller.
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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.
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.
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