Finance
What is the 'loan-to-value ratio' (LTV) and why does it matter in Rhode Island mortgage lending?
AThe ratio of the borrower's income to the loan amount; it determines eligibility
BThe ratio of the loan amount to the appraised value of the property; it affects interest rates, PMI requirements, and loan approval✓ Correct
CThe ratio of total debt to total income
DThe ratio of the down payment to the purchase price
Explanation
LTV is the loan amount divided by the appraised (or purchase) value of the property. A high LTV means higher risk for the lender, which may require PMI, result in a higher interest rate, or affect loan approval.
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