Finance
In North Dakota, a 'wraparound mortgage' is a type of creative financing where:
ATwo lenders share a first mortgage equally
BThe seller creates a new, larger mortgage that includes the existing mortgage, with the seller acting as the intermediary between the buyer and the original lender✓ Correct
CThe buyer wraps their credit card debt into the mortgage
DMultiple properties are bundled under one mortgage
Explanation
In a wraparound mortgage, the seller retains their existing mortgage and creates a new, larger mortgage to the buyer. The buyer makes payments to the seller, who continues paying the underlying mortgage.
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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.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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