Finance
A wraparound mortgage in Iowa is a type of creative financing where:
AA second mortgage includes the balance of the first mortgage
BThe buyer gets both a first and second mortgage from the same lender
CThe seller takes back a new mortgage that includes the existing mortgage balance✓ Correct
DA mortgage is shared between two buyers
Explanation
A wraparound mortgage is a seller-financing technique where the seller creates a new, larger mortgage that 'wraps around' (includes) the existing mortgage. The buyer makes payments on the new mortgage to the seller, and the seller continues making payments on the original mortgage.
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Key Terms to Know
Discount Points
Prepaid 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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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