Real Estate Math
A buyer qualifies for a monthly P&I payment of $1,620. Using a payment factor of $6.00 per $1,000, how large a loan can this buyer obtain?
A$270,000✓ Correct
B$250,000
C$300,000
D$220,000
Explanation
Loan amount = (Monthly payment / Factor) x $1,000 = ($1,620 / $6.00) x $1,000 = 270 x $1,000 = $270,000.
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Key Terms to Know
Pre-Approval
A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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.
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.
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