Real Estate Math
A Rhode Island investor purchases a property for $400,000 with a 25% down payment and obtains a mortgage for the balance. What is the loan amount?
A$100,000
B$300,000✓ Correct
C$400,000
D$500,000
Explanation
Down payment = $400,000 x 0.25 = $100,000.
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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.
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.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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