Finance
An Alaska buyer is purchasing a home for $400,000 with a 10% down payment. What is the loan-to-value (LTV) ratio?
A10%
B40%
C90%✓ Correct
D110%
Explanation
Loan-to-value ratio is calculated as the loan amount divided by the property value. With a 10% down payment ($40,000), the loan is $360,000.
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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.
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
Math Concepts
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