A California promissory note specifies that the borrower will make monthly payments of principal and interest in equal installments over 30 years. What type of loan amortization does this describe?
Correct Answer
A) Fully amortized loan with fixed payments
A fully amortized loan has equal monthly payments of principal and interest over the entire loan term (30 years), and the loan balance is reduced to zero by the final payment. This is the most common type of residential loan in California.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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