Free Arizona Finance Practice Test — LicenseIQ

Question 1

The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

Accepted Answer

The acceleration clause lets the lender call the entire debt due on default. The alienation (due-on-sale) clause is triggered by transfer of the property.

Question 2

A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

Accepted Answer

LTV is applied to the LESSER of price or appraised value: $290,000 x 0.75 = $217,500. Using the $300,000 price ($225,000) is the common mistake.

Question 3

Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?

Accepted Answer

$250,000 / $1,000 = 250; 250 x 4.77415 = $1,193.54.

Question 4

A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

Accepted Answer

Loans above the conforming limits cannot be sold to Fannie Mae/Freddie Mac and are non-conforming 'jumbo' loans, usually at higher rates.

Question 5

A loan whose payments are not large enough to pay it off by the end of the term, leaving a large final payment, is a:

Accepted Answer

Partially amortized loans require a balloon payment at maturity. Negative amortization means the balance actually increases because payments don't cover interest.

Question 6

Which document is recorded in the county records and makes the property collateral for a loan?

Accepted Answer

The mortgage creates the lien and is recorded. The promissory note is the borrower's personal promise to repay and is not recorded.

Question 7

A buyer purchases a home for $425,000 with a loan of $361,250. What is the LTV?

Accepted Answer

LTV = loan / price = $361,250 / $425,000 = 0.85 = 85%. (15% is the down payment percentage.)

Question 8

Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

Accepted Answer

PMI protects the lender and is generally required when the borrower puts down less than 20% (LTV over 80%).

Question 9

Adding a new financing contingency to an existing sales contract is done by a(n) ____, while changing the existing closing date is done by a(n) ____.

Accepted Answer

An addendum ADDs new terms; an amendment changes existing terms. Both require agreement of both parties.

Question 10

In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

Accepted Answer

Early payments are mostly interest; as the balance declines, more of each payment goes to principal.

Question 11

The periodic report a property manager gives the owner showing rents and other income collected and expenses paid for the period is the:

Accepted Answer

The income statement (P&L) summarizes income and expenses for the accounting period, typically monthly.

Question 12

On an adjustable-rate mortgage, the interest rate after the initial period is determined by:

Accepted Answer

ARM rate = index + margin, subject to periodic and lifetime caps. In a 5/1 ARM the rate is fixed 5 years, then adjusts every year.

Question 13

A financing contingency in a purchase agreement protects the:

Accepted Answer

A financing (mortgage) contingency lets the buyer cancel without penalty if unable to secure the specified loan by the deadline.

Question 14

A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

Accepted Answer

RESPA prohibits kickbacks and unearned referral fees between settlement service providers and real estate licensees, even if disclosed.

Question 15

On a $250,000 loan, how much is 2 discount points?

Accepted Answer

1 point = 1% of the loan. 2 points = 0.02 x $250,000 = $5,000.

Question 16

A short-term loan used to buy a new home before the borrower's current home sells is a:

Accepted Answer

A bridge loan 'bridges' the gap between buying and selling and is typically repaid within about 12 months when the old home sells.

Question 17

A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

Accepted Answer

At 95% LTV the down payment is 5% of price. Price = $18,000 / 0.05 = $360,000; loan = $342,000.

Question 18

On the buyer's side of the closing statement, the earnest money deposit and the new mortgage loan are both:

Accepted Answer

Earnest money and loan proceeds are sources of funds that reduce what the buyer must bring, so they are buyer credits.

Question 19

Which statement about FHA-insured loans is correct?

Accepted Answer

FHA loans are made by approved lenders and insured by FHA, with down payments as low as 3.5% and mortgage insurance premium (MIP) required on all FHA loans, for 1-4 family homes.

Question 20

The document issued by a VA-approved appraiser for a VA loan is the:

Accepted Answer

The VA appraiser issues a CRV. The Certificate of Eligibility establishes the veteran's entitlement before applying.

Question 21

RESPA primarily governs:

Accepted Answer

RESPA requires disclosure of settlement (closing) costs on 1-4 family residential loans and prohibits kickbacks. Rate advertising falls under TILA.

Question 22

A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

Accepted Answer

USDA Rural Development loans serve eligible rural buyers who meet income limits, often with no down payment.

Question 23

An agent tells a buyer he will show homes only if the buyer uses the agent's brother as mortgage broker. This is an illegal:

Accepted Answer

Conditioning one service on the purchase of another is a tying arrangement prohibited by antitrust law.

Question 24

A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

Accepted Answer

When unpaid interest is added to principal, the balance grows - negative amortization. An interest-only loan pays all interest, so the balance stays flat.

Question 25

Under the AAR purchase contract, the buyer must deliver a lender-completed Loan Status Update (LSU) within how many days after contract acceptance?

Accepted Answer

The AAR contract requires delivery of the LSU within ten days after acceptance, documenting the buyer's loan application status.

Arizona real estate finance practice test

1. The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

2. A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

3. Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?

4. A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

5. A loan whose payments are not large enough to pay it off by the end of the term, leaving a large final payment, is a:

6. Which document is recorded in the county records and makes the property collateral for a loan?

7. A buyer purchases a home for $425,000 with a loan of $361,250. What is the LTV?

8. Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

9. Adding a new financing contingency to an existing sales contract is done by a(n) , while changing the existing closing date is done by a(n) .

10. In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

11. The periodic report a property manager gives the owner showing rents and other income collected and expenses paid for the period is the:

12. On an adjustable-rate mortgage, the interest rate after the initial period is determined by:

13. A financing contingency in a purchase agreement protects the:

14. A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

15. On a $250,000 loan, how much is 2 discount points?

16. A short-term loan used to buy a new home before the borrower's current home sells is a:

17. A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

18. On the buyer's side of the closing statement, the earnest money deposit and the new mortgage loan are both:

19. Which statement about FHA-insured loans is correct?

20. The document issued by a VA-approved appraiser for a VA loan is the:

21. RESPA primarily governs:

22. A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

23. An agent tells a buyer he will show homes only if the buyer uses the agent's brother as mortgage broker. This is an illegal:

24. A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

25. Under the AAR purchase contract, the buyer must deliver a lender-completed Loan Status Update (LSU) within how many days after contract acceptance?

Sources