Finance
In Minnesota, a 'purchase-money mortgage' typically refers to a situation where:
AA buyer borrows from a commercial bank to purchase property
BThe seller provides financing by taking back a mortgage as part of the sale transaction✓ Correct
CThe buyer uses a government-guaranteed loan to purchase
DThe purchase price equals the mortgage amount
Explanation
A purchase-money mortgage is created when the seller finances all or part of the purchase price by taking back a mortgage (note and mortgage) from the buyer. The buyer pays the seller over time with interest instead of (or in addition to) obtaining conventional financing.
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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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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