Finance
When a Missouri borrower assumes an existing mortgage, they:
AMust obtain a new mortgage at current rates
BTake over responsibility for the existing mortgage under its original terms, subject to lender approval✓ Correct
CAre not liable if the original borrower defaults later
DAutomatically receive title free and clear
Explanation
In a loan assumption, the buyer takes over the seller's existing mortgage and becomes personally liable for the debt under the original loan terms. Lender approval is typically required.
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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.
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.
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.
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