Alabama Real Estate Practice Exam

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Prepare for the Alabama Real Estate Exam. Utilize flashcards and multiple-choice questions, each coupled with hints and explanations. Ace your upcoming test!

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What is a mortgage rate buydown?

  1. A penalty for paying off a mortgage early

  2. Financing usually offered by developers to help buyers

  3. A decrease in mortgage interest rates market-wide

  4. Insurance against future mortgage rate increases

The correct answer is: Financing usually offered by developers to help buyers

A mortgage rate buydown is a type of financing often offered by developers to entice buyers to purchase new homes. This option is incorrect because it doesn't accurately describe a mortgage rate buydown. Option A is incorrect because a penalty for paying off a mortgage early is known as a prepayment penalty, not a mortgage rate buydown. Option C is incorrect because a buydown only affects the interest rate on a specific mortgage, not the market as a whole. Option D is incorrect because insurance against future mortgage rate increases refers to a separate product known as a mortgage rate lock.

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