Real Estate Math
A buyer has $120,000 for a down payment. If lenders require a minimum 25% down for investment properties, what is the maximum property price the buyer can afford?
A$360,000
B$400,000
C$440,000
D$480,000✓ Correct
Explanation
Max price = $120,000 ÷ 0.25 = $480,000.
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Key Terms to Know
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
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