Finance
A North Dakota borrower is 'underwater' on their mortgage. This means:
AThe borrower has paid off more than half of the loan
BThe outstanding loan balance exceeds the property's current market value✓ Correct
CThe property is located in a flood zone
DThe borrower has missed several mortgage payments
Explanation
Being 'underwater' or 'upside-down' means the homeowner owes more on the mortgage than the property is currently worth. This makes it difficult to sell or refinance without a short sale or other arrangements.
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Key Terms to Know
Short Sale
A sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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