Finance
In Tennessee, a 'wraparound mortgage' is a financing arrangement where:
AThe buyer assumes the seller's existing mortgage
BA new mortgage is created that includes the balance of the existing mortgage✓ Correct
CMultiple lenders share the same mortgage
DThe mortgage wraps around all the property's boundaries
Explanation
A wraparound mortgage is a junior mortgage that includes the existing underlying mortgage balance. The buyer makes payments to the seller on the wraparound, and the seller continues making payments on the original mortgage.
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Key Terms to Know
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.
Short SaleA 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.
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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