Finance
The loan-to-value (LTV) ratio is important in Rhode Island mortgage lending because:
AIt determines the interest rate set by the Federal Reserve
BHigher LTV ratios indicate higher risk to the lender and may trigger mortgage insurance requirements✓ Correct
CIt establishes the maximum purchase price a buyer may offer
DIt is used to calculate the Rhode Island Realty Transfer Tax
Explanation
The LTV ratio measures the loan amount relative to the property's appraised value. Higher LTVs mean the lender is exposed to more risk. Conventional loans with LTV above 80% typically require private mortgage insurance (PMI).
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