Real Estate Math
A Minnesota buyer puts 20% down on a $375,000 home. The down payment is $75,000. How much will be financed?
A$280,000
B$300,000✓ Correct
C$325,000
D$350,000
Explanation
Loan amount = Purchase price - Down payment = $375,000 - $75,000 = $300,000. With a 20% down payment, the borrower will finance 80% of the purchase price: $375,000 x 80% = $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.
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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