Finance
A Massachusetts co-op buyer finances their purchase differently from a condo buyer because co-op buyers finance:
AUsing a conventional mortgage secured by the unit
BUsing a 'share loan' secured by shares of the cooperative corporation, not by real property✓ Correct
CUsing only cash—co-ops cannot be financed
DUsing only FHA loans
Explanation
Co-op buyers finance the purchase of shares in the cooperative corporation (not real property) using a share loan. Because the buyer doesn't own real estate, traditional mortgage financing is not available; specialized share loans are used instead.
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Key Terms to Know
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.
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.
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