Virginia Real Estate Exam Practice Question
Lenders will require which type of fund for taxes and insurance?
Correct Answer: D
Rationale: Lenders require a reserve fund to ensure that there are sufficient funds set aside for property taxes and insurance payments. This fund acts as a financial safety net, demonstrating the borrower's ability to manage ongoing costs associated with homeownership.
Option A, a balloon fund, refers to a type of loan that requires a large final payment, which is unrelated to tax and insurance reserves. Option B, an emergency fund, is meant for unexpected expenses but does not specifically cover taxes or insurance. Option C, a mortgage fund, pertains to the principal and interest of the loan, not the additional costs of taxes and insurance.
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