Arizona Real Estate License Real Estate Financing Concepts 2

Question 1

In a fully amortized loan, what happens to the interest portion of each payment over the life of the loan?

Accepted Answer

It decreases as the principal balance declines

Answer

It stays the same each payment

Answer

It increases as the balance declines

Answer

It is paid entirely in the final payment

Question 2

A loan that requires a large final payment because it is not fully amortized is called a:

Accepted Answer

Balloon loan

Answer

Fully amortized loan

Answer

Straight loan

Answer

Reverse mortgage

Question 3

What is the primary purpose of a promissory note in a real estate transaction?

Accepted Answer

It is the borrower's written promise to repay the debt

Answer

It transfers title to the buyer

Answer

It insures the lender against default

Answer

It records the deed with the county

Question 4

In Arizona, which security instrument is most commonly used to secure real estate loans?

Accepted Answer

Deed of trust

Answer

Mortgage

Answer

Land contract

Answer

Estoppel certificate

Question 5

A buyer assumes an existing loan 'subject to' the mortgage. Who remains primarily liable for the debt?

Accepted Answer

The original borrower (seller)

Answer

The buyer only

Answer

The lender

Answer

The title company

Question 6

What does the term 'loan-to-value ratio' (LTV) measure?

Accepted Answer

The loan amount compared to the property's value

Answer

The borrower's income versus debt

Answer

The interest rate versus market rate

Answer

The property tax versus assessed value

Question 7

Private mortgage insurance (PMI) is typically required when:

Accepted Answer

The down payment is less than 20%

Answer

The loan is a VA loan

Answer

The buyer pays all cash

Answer

The property is commercial