Finance
A wraparound mortgage in Iowa real estate involves:
AThe buyer obtaining a new first mortgage to pay off the seller's existing loan
BThe seller keeping their existing mortgage and creating a new, larger mortgage with the buyer that 'wraps around' the underlying loan✓ Correct
CTwo co-buyers sharing one mortgage
DRefinancing a mortgage to include home equity
Explanation
A wraparound mortgage allows a seller to retain their existing mortgage while creating a new, larger mortgage with the buyer. The buyer makes payments to the seller, who continues paying the underlying loan.
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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.
Math Concepts
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