Finance
Arizona is classified as a 'lien theory' state. This means that when a borrower takes out a mortgage:
AThe lender takes legal title to the property until the loan is repaid
BThe borrower retains title, and the mortgage is a lien on the property✓ Correct
CThe property is held in trust by a neutral third party
DThe lender and borrower share title equally
Explanation
In lien theory states like Arizona, the borrower retains legal title to the property while the mortgage serves as a lien against it. The lender can foreclose on the lien if the borrower defaults.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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