Question

Buyer A agrees to make monthly payments to pay back the money he borrowed to purchase his home. Each payment will consist of principle and interest, every payment will be the same and the loan will be paid off with the last payment. He most likely signed a(n)________

Answer 1

Buyer A most likely signed a fixed-rate mortgage, a loan where the monthly payment stays the same over the term and includes parts of both principal and interest.

Step-by-step explanation:

Buyer A has most likely signed a fixed-rate mortgage. This type of loan is characterized by a constant monthly payment that includes both the principal and interest components.

The loan's total amount will be paid off with the last payment, assuming all payments are made on time.

A mortgage is akin to a line of credit for purchasing a home, where typically, a down payment is made upfront—often suggested to be around twenty-percent of the home's purchase price.

For example, on a $100,000 home, a $20,000 down payment would be standard, with the remaining balance financed through a mortgage loan.

The interest rate of a mortgage, along with the loan's term and principal amount, dictates the monthly payment required over the life of the loan.