Finance
An Iowa borrower who is 'upside down' in their mortgage owes:
AMore in property taxes than they can afford
BMore on their mortgage than the property is currently worth✓ Correct
CInterest that exceeds the property's rental income
DA balloon payment that became due unexpectedly
Explanation
Being 'upside down' (underwater) means the outstanding mortgage balance exceeds the property's current market value. This situation can occur when property values decline after purchase and creates challenges for selling or refinancing.
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Key Terms to Know
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.
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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