Real Estate Math
An Indiana buyer has $60,000 available for a down payment. If lenders require 20% down, what is the maximum home price the buyer can purchase?
A$240,000
B$300,000✓ Correct
C$320,000
D$360,000
Explanation
Maximum price = Down payment ÷ Down payment percentage = $60,000 ÷ 0.20 = $300,000.
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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.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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