Real Estate Math
A home buyer qualifies for a loan with a maximum monthly payment of $1,800. Using a factor of $5.37 per $1,000 borrowed (30-year, 6% fixed), what is the maximum loan amount?
A$315,000
B$325,000
C$335,174✓ Correct
D$345,000
Explanation
Maximum loan = ($1,800 ÷ $5.37) × $1,000 = 335.
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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.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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