Arizona Real Estate License FREE Arizona Real Estate License Financing and Valuation Principles Questions and Answers 2

Question 1

In Arizona, what does the loan-to-value (LTV) ratio represent?

Accepted Answer

The ratio of the loan amount to the appraised value of the property

Answer

The LTV ratio compares the mortgage loan amount to the appraised value or purchase price of the property, whichever is lower.

Question 2

Which appraisal approach estimates value by calculating the cost to rebuild the structure minus depreciation plus land value?

Accepted Answer

Cost approach

Answer

The cost approach estimates value by adding the land value to the current cost of constructing the improvements, then subtracting accrued depreciation.

Question 3

A borrower obtains an adjustable-rate mortgage (ARM) in Arizona; what component sets the baseline for rate adjustments?

Accepted Answer

The index

Answer

The index is a published benchmark interest rate, such as the Treasury rate, that serves as the baseline for calculating ARM rate adjustments.

Question 4

What is the primary purpose of a deed of trust in Arizona real estate financing?

Accepted Answer

To serve as the security instrument that pledges the property as collateral for the loan

Answer

In Arizona, a deed of trust is the security instrument that pledges the property as collateral, involving a borrower, lender, and neutral trustee.

Question 5

When using the income capitalization approach, how is the value of an investment property determined?

Accepted Answer

By dividing the net operating income by the capitalization rate

Answer

The income capitalization approach divides the property's net operating income (NOI) by an appropriate capitalization rate to estimate market value.

Arizona Real Estate License Practice Test

Arizona Real Estate License Practice Test

Arizona Real Estate License FREE Arizona Real Estate License Financing and Valuation Principles Questions and Answers 2