Illinois Real Estate Exam Practice Question
A lender may add 1/12th of the estimated cost of the annual property taxes and hazard insurance on the mortgaged property to the monthly loan payment for deposit in
Correct Answer: C
Rationale: Lenders often require borrowers to contribute to an account that ensures property taxes and hazard insurance are paid on time. This is done through an impound, escrow, or reserve account, where 1/12th of the annual costs is added to the monthly payment.
Option A, a PMI account, is specifically for private mortgage insurance, not for taxes or insurance payments. Option B, a margin account, relates to investment borrowing and is not applicable in this context. Option D, an adjustment account, is not a standard term used in mortgage practices and does not pertain to the collection of property-related costs.
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