Finance
A Virginia borrower's loan-to-value (LTV) ratio is 90%. This means:
AThe down payment is 90% of the purchase price
BThe loan amount is 90% of the property's appraised value✓ Correct
CThe property is 90% paid off
DThe borrower owes 10% more than the property is worth
Explanation
LTV = Loan Amount ÷ Appraised Value. An LTV of 90% means the borrower financed 90% and put down 10%.
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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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