Arizona Real Estate License Financing and Valuation Principles 2

Question 1

A borrower obtains a loan where the interest rate can adjust periodically based on an index. What type of mortgage is this?

Accepted Answer

Adjustable-rate mortgage (ARM)

Answer

Fixed-rate mortgage

Answer

Balloon mortgage

Answer

Wraparound mortgage

Question 2

In an appraisal, the principle that a property's value tends to equal the cost of acquiring an equally desirable substitute is called:

Accepted Answer

Principle of substitution

Answer

Principle of conformity

Answer

Principle of anticipation

Answer

Principle of contribution

Question 3

Which loan program is insured by the Federal Housing Administration?

Accepted Answer

FHA loan

Answer

VA loan

Answer

Conventional loan

Answer

USDA guaranteed loan

Question 4

A property generates $24,000 in annual net operating income and sold for $300,000. What is the capitalization rate?

Accepted Answer

8%

Answer

6%

Answer

10%

Answer

12%

Question 5

Which clause allows a lender to demand full repayment if the borrower sells the property?

Accepted Answer

Due-on-sale clause

Answer

Acceleration clause

Answer

Defeasance clause

Answer

Subordination clause

Question 6

The appraisal approach most appropriate for valuing a newly built special-purpose building like a school is the:

Accepted Answer

Cost approach

Answer

Sales comparison approach

Answer

Income approach

Answer

Gross rent multiplier approach

Question 7

Points paid to a lender to lower the interest rate are also known as:

Accepted Answer

Discount points

Answer

Origination fees

Answer

PMI premiums

Answer

Escrow reserves