FinanceIntermediateAlaska Exam
An Alaska property sells for $500,000. The buyer gets a loan for $400,000. The lender requires an appraisal. The appraiser values the property at $480,000. What is the maximum loan the lender will approve at 80% LTV based on appraised value?
A$320,000
B$384,000Correct
C$400,000
D$480,000
Why $384,000 Is Correct
Answer B: $384,000
Lenders base LTV on the LOWER of appraised value or purchase price. Appraised value ($480,000) < purchase price ($500,000), so the lender uses $480,000.
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
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Math Concepts
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