Question

Ari obtains a mortgage loan from Bayside Bank so that he can buy a house. The house costs $200,000. Ari makes a down payment of $20,000. Based on the amount of the price paid up front, Bayside will likely require Ari to

a.agree to a prepayment penalty clause.
b.pay all claims against the property.
c.obtain mortgage insurance.
d.record the mortgage loan.

Answer 1

Ari's down payment of $20,000 on a $200,000 house is below the usual 20% threshold, therefore, Bayside Bank will most likely require him to obtain mortgage insurance to protect against default.

Step-by-step explanation:

Ari is purchasing a house for $200,000 and is making a down payment of $20,000. When a buyer like Ari pays less than a 20% down payment on a property, lenders usually require the borrower to obtain mortgage insurance. This insurance protects the lender if the borrower is unable to make payments and goes into default. In Ari's case, because his down payment is 10%, which is below the usually recommended 20%, Bayside Bank will likely require him to c. obtain mortgage insurance. Mortgage insurance adds an additional cost to the monthly payments and increases the overall amount paid over time for the home. Therefore, Ari's up-front payment will trigger the need for mortgage insurance, not a prepayment penalty clause, the responsibility to pay all claims against the property, or the requirement to record the mortgage loan, as recording is a standard part of the mortgage process unrelated to the down payment size.