FinanceIntermediateArizona Exam

In Arizona, a 'wraparound mortgage' (or 'all-inclusive trust deed') involves:

AA second-position lien that takes priority over the first mortgage through a court-approved refinancing that subordinates the original lender's security interest

BA new loan that encompasses an existing loan, where the new lender accepts payments on the new loan and continues making payments on the underlying loanCorrect

CA floating-rate mortgage whose interest rate adjusts automatically each month to track the borrower's income, wrapping the payment obligation around available cash flow

DA construction-to-permanent loan that wraps around the land acquisition cost and absorbs it into the final mortgage balance at the completion of construction

Why A new loan that encompasses an existing loan, where the new lender accepts payments on the new loan and continues making payments on the underlying loan Is Correct

Answer B: A new loan that encompasses an existing loan, where the new lender accepts payments on the new loan and continues making payments on the underlying loan

A wraparound mortgage (AITD—All-Inclusive Trust Deed in Arizona) is a form of seller financing where the seller carries a new, larger loan while remaining responsible for the original underlying loan. The buyer pays the seller on the new loan, and the seller pays the original lender.

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.

Key Finance Terms in This Question

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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.

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Key Terms to Know

Debt-to-Income Ratio (DTI)

A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.

Pre-Approval

A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.

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.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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