Finance
A Colorado buyer is getting an FHA loan. The property appraises for $310,000 and the purchase price is $320,000. The maximum FHA loan amount (at 96.5% LTV) is based on:
AA. The purchase price of $320,000
BB. The appraised value of $310,000✓ Correct
CC. The average of both values
DD. The buyer's desired loan amount
Explanation
FHA loans are based on the lesser of the appraised value or purchase price. Since the property appraises for $310,000 (less than the $320,000 purchase price), the maximum FHA loan would be 96.5% × $310,000 = $299,150. The buyer must cover the gap.
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