Loan-to-value (LTV) ratio is calculated as:
Why Loan amount divided by appraised value (or purchase price, whichever is lower) Is Correct
Answer B: Loan amount divided by appraised value (or purchase price, whichever is lower)
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.
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Key Terms to Know
A legal relationship in which a licensee (agent) acts on behalf of a principal (buyer or seller) in a real estate transaction.
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.
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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