Finance
A Kentucky borrower is 'upside down' on their mortgage. This means:
ATheir mortgage payment is due before their income arrives
BThe loan balance exceeds the current market value of the property✓ Correct
CTheir interest rate is higher than current market rates
DThey have too many liens on the property
Explanation
Being 'upside down' (or 'underwater') means the mortgage balance is greater than the property's current market value, leaving the owner with negative equity.
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Key Terms to Know
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.
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.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Math Concepts
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