Arkansas Real Estate License Property Valuation and Financing 4

Question 1

Which loan feature allows the interest rate to change periodically based on a financial index, potentially raising or lowering monthly payments?

Accepted Answer

Adjustable-rate mortgage (ARM)

Answer

An ARM has an interest rate tied to a financial index that can adjust at specified intervals during the loan term.

Question 2

A comparable property sold for $210,000. The comparable has a two-car garage worth $8,000 that the subject property lacks. What adjusted sale price should be used for the comparable?

Accepted Answer

$202,000

Answer

Because the comparable is superior (has a garage), subtract $8,000 from the sale price: $210,000 − $8,000 = $202,000.

Question 3

In Arkansas, the USDA Rural Development loan program is designed to benefit:

Accepted Answer

Buyers purchasing in eligible rural and suburban areas who meet income limits

Answer

USDA loans assist low-to-moderate income buyers purchasing in USDA-designated rural and suburban areas.

Question 4

The principle of substitution, which underlies all three appraisal approaches, states that:

Accepted Answer

A buyer will pay no more for a property than the cost of acquiring an equally desirable substitute

Answer

The principle of substitution holds that an informed buyer won't overpay when a comparable property is available at a lower price.

Question 5

What is a 'balloon mortgage' in Arkansas real estate financing?

Accepted Answer

A loan with smaller regular payments followed by one large final payment

Answer

A balloon mortgage has regular (often interest-only or partially amortizing) payments with a large lump-sum payment due at the end of the term.

Arkansas Real Estate License Practice Test

Arkansas Real Estate License Practice Test

Arkansas Real Estate License Property Valuation and Financing 4