A Florida licensee is representing a seller who wants to carry back a second mortgage for part of the purchase price. The buyer is obtaining a first mortgage for 80% of the purchase price, and the seller will carry 15% as a second mortgage. What should the licensee ensure regarding the second mortgage?
Correct Answer
B) The first mortgage lender must approve the second mortgage arrangement
The first mortgage lender must approve the second mortgage arrangement because most first mortgage lenders require approval of any additional financing that affects the borrower's debt-to-income ratio. Option A is incorrect because recording order doesn't determine priority in this context. Option C is incorrect because there's no requirement for the second mortgage rate to be lower. Option D is incorrect because Florida doesn't limit seller-carried second mortgages to 10% of purchase price.
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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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