Finance
In South Carolina, what is 'collateral' in a mortgage transaction?
AThe co-signer on the mortgage
BThe real property securing the loan — if the borrower defaults, the lender can foreclose on the collateral✓ Correct
CThe lender's fee for making the loan
DThe borrower's savings account used as additional security
Explanation
Collateral in a mortgage is the real property pledged as security for the loan. If the borrower defaults, the lender has the right to foreclose on the collateral property to recover the outstanding loan balance.
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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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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.
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