Finance
In Washington, a 'purchase money mortgage' is one where:
AThe purchase price must equal the mortgage amount
BThe mortgage is given to the seller (or a lender) as part of the purchase price consideration at the time of purchase✓ Correct
CThe buyer pays cash and there is no mortgage
DThe mortgage is obtained after the purchase is complete
Explanation
A purchase money mortgage is created at the time of purchase — either given to a third-party lender to fund the purchase or directly to the seller (seller carry-back). It is used to acquire the property being mortgaged.
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Key Terms to Know
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.
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.
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