FinanceIntermediateArizona Exam

In Arizona, a 'purchase money mortgage' is one that:

AIs used to finance the purchase of construction materials and labor costs for a new residential construction project on a vacant lot already owned by the borrower

BIs given to the seller as part of the purchase price when the seller provides financingCorrect

CIs a government-backed mortgage available to qualified first-time homebuyers through the Arizona Housing Finance Authority's below-market interest rate program

DIs a mortgage taken out by a buyer at a public trustee's auction to finance the purchase of a foreclosed property sold at a court-supervised bidding process

Why Is given to the seller as part of the purchase price when the seller provides financing Is Correct

Answer B: Is given to the seller as part of the purchase price when the seller provides financing

A purchase money mortgage is a mortgage given to the seller (or a third party) as part of the purchase price. When the seller provides financing, the seller holds a purchase money mortgage (seller carryback).

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

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Key Terms to Know

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.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Earnest Money

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.