Washington Real Estate Broker Exam — All Questions
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2 questions
Financing
A buyer assumes the seller's existing loan and also gives the seller a new, larger loan that 'wraps around' the old one. This financing technique is a:
- a.Wraparound mortgage✓
- b.Reverse mortgage
- c.Purchase-money bridge loan
- d.Blanket release
A wraparound mortgage is a junior loan that includes (wraps around) an existing loan, which stays in place. The buyer pays the wraparound lender, who continues paying the underlying loan. It is a form of seller financing, subject to any due-on-sale clause.
Financing
Discount points paid to a lender at closing are best described as:
- a.A penalty for paying the loan off early
- b.Money set aside for property taxes
- c.A prepaid interest charge that lowers the loan's interest rate, where one point equals 1% of the loan amount✓
- d.The lender's title insurance premium
Discount points are prepaid interest paid to buy down the interest rate. One point equals one percent of the loan amount. Paying points reduces the rate and thus the monthly payment over the life of the loan.