Harrison applies for a mortgage loan from Hill Top Bank that has an APR that is 1.5 percent more than the average prime offer rate for a comparable transaction.This loan is Harrison's first mortgage.Before giving Harrison the loan,Hill Top Bank must

Question

Quizplus · Accepted Answer

Hill Top Bank must establish an escrow account for Harrison's payments for homeowners' insurance and property taxes and verify Harrison's ability to repay the loan. This is because Harrison's loan is his first mortgage and the lender is charging an APR that is higher than the average prime offer rate, which means that the lender is taking on more risk by lending to him. Therefore, the lender must ensure that Harrison is able to repay the loan and also establish an escrow account to ensure that the property taxes and homeowners' insurance are paid on time. This helps to protect the lender's investment in the property.

Harrison Applies for a Mortgage Loan from Hill Top Bank