Arizona Real Estate License Financing and Valuation Principles 3

Question 1

Which document is the promise to repay a debt, separate from the instrument that pledges the property as security?

Accepted Answer

Promissory note

Answer

The promissory note is the borrower's written promise to repay; the mortgage or deed of trust secures it.

Question 2

In an appraisal, physical, functional, and external are the three types of:

Accepted Answer

Depreciation

Answer

Depreciation in appraisal is categorized as physical deterioration, functional obsolescence, and external obsolescence.

Question 3

A loan where the payments do not fully repay the principal, leaving a large final payment, is a:

Accepted Answer

Balloon loan

Answer

A balloon loan requires a large lump-sum payment of remaining principal at the end of the term.

Question 4

Which financing arrangement has the seller carry back a loan for the buyer instead of a bank?

Accepted Answer

Seller financing

Answer

In seller (owner) financing, the seller extends credit to the buyer, who repays the seller directly.

Question 5

A home appraised at $250,000 with a loan of $200,000 has what loan-to-value ratio?

Accepted Answer

80%

Answer

LTV = loan / value = $200,000 / $250,000 = 80%.

Arizona Real Estate License Practice Test