A Florida buyer is considering an adjustable-rate mortgage (ARM). The real estate agent should explain that the initial interest rate on an ARM is typically:
Correct Answer
C) Lower than fixed-rate mortgages to attract borrowers
Correct: ARM initial rates (teaser rates) are typically lower than fixed-rate mortgages to attract borrowers, with the understanding that rates may adjust higher later. Option A is incorrect as initial ARM rates are usually lower. Option B is wrong as rates typically differ. Option D oversimplifies rate determination factors.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
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