Finance
What is the purpose of a loan-to-value (LTV) ratio in Utah mortgage underwriting?
AIt calculates the borrower's monthly payment
BIt measures the ratio of the loan amount to the property's appraised value✓ Correct
CIt determines the borrower's credit score tier
DIt sets the maximum interest rate the lender may charge
Explanation
The LTV ratio expresses the loan amount as a percentage of the property's appraised value. A lower LTV indicates more equity and less risk for the lender.
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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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
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