Arizona Real Estate License Arizona Real Estate License Real Estate Financing Concepts Questions and Answers 2 — Questions and Answers
Question 1: In Arizona, which type of mortgage clause allows the lender to demand full repayment if the borrower sells or transfers the property?
- Due-on-sale clause (Correct answer)
- Defeasance clause
- Subordination clause
- Prepayment clause
Correct answer: Due-on-sale clause
A due-on-sale clause gives the lender the right to demand immediate full payment of the loan balance when the property is sold or transferred.
Question 2: What is the primary difference between a mortgage and a deed of trust in Arizona real estate financing?
- A deed of trust involves three parties while a mortgage involves two (Correct answer)
- A mortgage allows non-judicial foreclosure while a deed of trust does not
- A deed of trust has no promissory note requirement
- A mortgage must be recorded but a deed of trust does not
Correct answer: A deed of trust involves three parties while a mortgage involves two
A deed of trust involves the borrower, lender, and a neutral third-party trustee, whereas a mortgage involves only the borrower and lender.
Question 3: Which federal regulation requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a mortgage application?
- TILA-RESPA Integrated Disclosure (TRID) (Correct answer)
- Community Reinvestment Act
- Home Mortgage Disclosure Act
- Fair Credit Reporting Act
Correct answer: TILA-RESPA Integrated Disclosure (TRID)
TRID rules under the combined TILA-RESPA framework require lenders to deliver a Loan Estimate within three business days of a completed loan application.
Question 4: A borrower obtains a loan where monthly payments cover only the interest for the first five years. What type of loan is this?
- Interest-only loan (Correct answer)
- Fully amortized loan
- Balloon payment loan
- Reverse mortgage
Correct answer: Interest-only loan
An interest-only loan requires the borrower to pay only the interest portion for a set period before principal payments begin.
Question 5: In Arizona, what is the typical redemption period after a judicial foreclosure sale?
- Six months (Correct answer)
- Thirty days
- One year
- No redemption period
Correct answer: Six months
Arizona law generally provides a six-month statutory redemption period following a judicial foreclosure sale.
Question 6: Which ratio compares a borrower's total monthly debt obligations to their gross monthly income and is commonly used by lenders in Arizona?
- Debt-to-income ratio (Correct answer)
- Loan-to-value ratio
- Housing expense ratio
- Equity-to-debt ratio
Correct answer: Debt-to-income ratio
The debt-to-income ratio measures all recurring monthly debt payments against the borrower's gross monthly income to assess lending risk.
Arizona Real Estate License Arizona Real Estate License Real Estate Financing Concepts Questions and Answers 2
In Arizona, which type of mortgage clause allows the lender to demand full repayment if the borrower sells or transfers the property?