Real Estate Math
An Arizona buyer qualifies for a maximum loan with a payment factor of $7.69 per $1,000 at 8% for 30 years. If their maximum P&I payment is $1,846, what is their maximum loan?
A$220,000
B$230,000
C$240,000✓ Correct
D$250,000
Explanation
Max loan = (Max P&I ÷ Payment factor per $1,000) × 1,000 = ($1,846 ÷ $7.69) × 1,000 = 240.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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