Real Estate Math
A Las Vegas home is appraised at $460,000. The lender will loan 80% of appraised value or purchase price, whichever is lower. The purchase price is $470,000. What is the maximum loan amount?
A$376,000
B$368,000✓ Correct
C$375,000
D$380,000
Explanation
The lender uses the lower of appraised value ($460,000) or purchase price ($470,000) = $460,000. Maximum loan = $460,000 × 0.80 = $368,000.80 = $368,000. The correct answer is $368,000, which is option B. This LTV calculation is critical: lenders always base the loan on the lower of appraised value or purchase price to protect against inflated purchase prices.
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