### What is the primary purpose of the due-on-sale clause in a mortgage? - [ ] To allow lenders to change the interest rate upon sale - [ ] To prevent the sale of the property entirely - [ ] To restrict any improvements on the property - [x] To ensure the balance of the loan is paid if the home is sold > **Explanation:** The due-on-sale clause ensures that the remaining balance of the mortgage is paid off before the seller can receive any proceeds from the sale, protecting the lender's interest in the property. ### When must the loan balance be paid according to the due-on-sale clause? - [ ] When the homeowner decides to refinance - [ ] When the homeowner defaults on loan payments - [x] When the property is sold - [ ] When the homeowner makes significant home improvements > **Explanation:** The due-on-sale clause specifically stipulates that the loan balance must be paid when the property is sold, making it clear to the borrower that the mortgage must be settled before benefiting from the property's sale proceeds. ### What role does a title search play in the home-selling process? - [ ] It ensures the selling price is correct - [x] It helps discover lien holders of the property - [ ] It offers legal protection to the seller - [ ] It helps in valuation of the property > **Explanation:** A title search is conducted to find any existing lien holders on the property. This is crucial to ensure that any outstanding loans or claims are settled before the property can be sold. ### Who is responsible for determining the entitlement to payment when a home is sold? - [x] The lender financing the property for the new buyer - [ ] The real estate agent handling the sale - [ ] The homeowner selling the property - [ ] The local government > **Explanation:** The lender who is financing the property for the new buyer performs the necessary research to determine who is entitled to payment, ensuring the loan balance and other obligations are met before any proceeds are disbursed to the seller. ### What happens if a home with a mortgage is sold without paying off the balance? - [ ] The buyer assumes the mortgage - [ ] The sale cannot proceed - [x] The due-on-sale clause mandates that the loan balance must be paid, halting the sale until this is resolved - [ ] The previous owner keeps any outstanding funds > **Explanation:** The due-on-sale clause requires that the loan balance be settled before the sale can proceed and the seller receives proceeds. This ensures the lender's interest is protected. ### Which of the following is NOT an implication of the due-on-sale clause? - [ ] The mortgage balance must be paid off upon sale. - [x] The property must be sold within a specific timeframe. - [ ] The seller cannot receive sale proceeds without settling the mortgage. - [ ] It protects the lender's interest in the property. > **Explanation:** The due-on-sale clause does not mandate a specific timeframe within which the property must be sold; it only stipulates that the loan balance must be paid if the property is sold. Other choices are true implications. ### Can a due-on-sale clause affect a borrower's decision to sell their home? - [x] Yes, because they must ensure the loan balance is paid off. - [ ] No, because it only affects the buyer. - [ ] No, because it only includes interest rate changes. - [ ] Yes, because it forces them to refinance. > **Explanation:** The due-on-sale clause can indeed affect a borrower's decision to sell because they must arrange for the mortgage balance to be paid off when the sale occurs, which could impact their net profits and timing. ### Why might it be difficult for the proceeds of a home sale to go directly to the seller if the home is financed? - [ ] Due to legal restrictions on property sales. - [x] Because the proceedings must cover the current mortgage loan balance first. - [ ] Because of fees and taxes exceeding sale price. - [ ] Due to mandatory equity repayment rules. > **Explanation:** The proceeds usually cannot go directly to the seller if the home is financed, because the due-on-sale clause requires that the current mortgage loan balance must be paid off first. ### Which document typically includes the due-on-sale clause? - [ ] The property insurance policy - [ ] The homeowner's association agreement - [ ] The purchase agreement - [x] The mortgage contract > **Explanation:** The due-on-sale clause is typically a section included within the mortgage contract that outlines the borrower's obligations to repay their loan if the property is sold. ### What might the lender do to discover lien holders of a property for sale? - [ ] Conduct home inspections - [x] Perform a title search - [ ] Hire a real estate agent - [ ] Monitor property improvements > **Explanation:** The lender performs a title search to discover any lien holders and determine who must be paid off when the property is sold. This ensures all obligations, including outstanding mortgages, are met.