Finance
A 'buydown' in a Minnesota mortgage transaction means:
AThe lender reduces the loan amount
BA third party (seller or lender) pays points upfront to reduce the borrower's interest rate, either temporarily or permanently✓ Correct
CThe buyer pays a larger down payment to reduce monthly payments
DThe government subsidizes the interest rate
Explanation
A buydown involves paying discount points upfront to reduce the mortgage interest rate. A 2-1 buydown, for example, reduces the rate by 2% in year one and 1% in year two, then adjusts to the full rate. In Minnesota transactions, sellers sometimes offer buydowns as a sales incentive.
Related Minnesota Finance Questions
- A Minnesota homebuyer's loan is approved 'subject to' conditions. Which condition would NOT typically be required by a lender?
- A Minnesota property owner with 40% equity in their home wants to purchase a rental property. They could use which strategy to leverage their existing equity without selling?
- In Minnesota, which type of mortgage requires the borrower to pay interest only for a specified period, after which they begin paying principal and interest?
- What is the purpose of an escrow account (impound account) held by a lender?
- A Minnesota mortgage lender charges origination points, not to be confused with discount points. Origination points are:
- A Minnesota couple is purchasing a $380,000 home. They have $50,000 for a down payment. What LTV will they have, and will they need PMI on a conventional loan?
- In Minnesota, which of the following is a 'non-recourse' mortgage?
- A Minnesota property is sold at a foreclosure sale for less than the outstanding mortgage balance. The lender may seek the remaining balance from the borrower through a:
Practice More Minnesota Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Minnesota Quiz →