In which situation would a borrower typically receive a credit at closing?
Correct Answer
B) When the seller has prepaid the annual property insurance
When the seller has prepaid expenses like property insurance that will benefit the buyer after closing, the buyer typically receives a credit for the unused portion. This is a standard proration adjustment on the settlement statement.
Why This Is the Correct Answer
When the seller has prepaid expenses like property insurance that will benefit the buyer after closing, the buyer typically receives a credit for the unused portion. This is a standard proration adjustment on the settlement statement.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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In an interest-only mortgage, the borrower makes interest-only payments for the first 5 years, then begins making fully amortizing payments. This payment change is considered:
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A borrower has a monthly gross income of $8,000. Their proposed mortgage payment is $2,200 (including PITI), and they have additional monthly debt obligations of $600. If the lender's maximum front-end DTI is 28% and back-end DTI is 36%, what is the borrower's situation?