Origination ActivitiesQuestion 273 of 400
At settlement on a purchase, property taxes are 'prorated' between buyer and seller. What does proration accomplish?
a.It waives the taxes for the year
b.It doubles the tax bill at closing
c.It allocates taxes so each party pays for the portion of the period they owned the property
d.It transfers the taxes to the lender permanently
Explanation
Proration divides recurring costs like property taxes between buyer and seller based on the portion of the tax period each owns the property. This ensures each party pays their fair share as of the closing date. It does not waive, double, or permanently transfer the taxes.
Practice all 400 questions free — no signup required.
Related questions on this topic
- An appraisal uses the cost approach on a newer, unique home with few comparable sales. The cost approach estimates value by:
- A borrower makes a 20% down payment on a conventional loan. What is one common effect on the loan structure?
- An appraiser adjusts a comparable that has an extra bathroom compared to the subject property. In the sales comparison approach, adjustments are made to the:
- A borrower's DU findings return 'Refer/Eligible.' What does this typically mean for the file?
- During processing, the borrower opens a new credit card and finances furniture before closing. Why can this jeopardize the loan?
- A title commitment lists Schedule B exceptions. What are these exceptions?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NMLS SAFE Mortgage Loan Originator National Test · How we review