Finance
A Florida property is purchased for $450,000 with a 20% down payment. The LTV ratio on the mortgage is:
A20%
B80%✓ Correct
C25%
D75%
Explanation
Loan-to-Value (LTV) = Loan Amount ÷ Property Value. With 20% down on $450,000: Down payment = $90,000; Loan = $360,000.
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Key Terms to Know
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.
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.
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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