Property Valuation
An appraiser in Rhode Island determines that a property's value is $375,000. The purchase price was $395,000. What does this mean for an FHA loan?
AThe loan is based on the purchase price of $395,000
BFHA will base the maximum loan on the lower of appraised value or purchase price ($375,000)✓ Correct
CThe buyer must pay the difference in cash but the loan equals the purchase price
DThe appraiser must revise the value to match the purchase price
Explanation
FHA loans are based on the lower of the appraised value or the purchase price. If the appraisal comes in below the purchase price, the FHA loan limit is based on $375,000, and the buyer must either pay the difference in cash or renegotiate the price.
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