Finance
What does the loan-to-value (LTV) ratio measure?
AThe ratio of the buyer's income to the monthly payment
BThe relationship between the loan amount and the property's appraised value✓ Correct
CThe percentage of the purchase price paid as commission
DThe ratio of taxes to property value
Explanation
LTV = Loan Amount / Appraised Value × 100. A lower LTV indicates more equity and lower risk for the lender. Most conventional loans require an LTV of 80% or less to avoid private mortgage insurance (PMI).
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