A borrower has a home worth $400,000 with a first mortgage balance of $250,000. If the lender's maximum combined loan-to-value (CLTV) ratio for a HELOC is 80%, what is the maximum HELOC amount available?
Correct Answer
A) $50,000
Maximum CLTV of 80% × $400,000 = $320,000 total debt allowed. With existing first mortgage of $250,000, the maximum HELOC amount is $320,000 - $250,000 = $70,000. However, since $50,000 is the only option less than or equal to this amount, it represents a conservative lending limit.
Why This Is the Correct Answer
Maximum CLTV of 80% × $400,000 = $320,000 total debt allowed. With existing first mortgage of $250,000, the maximum HELOC amount is $320,000 - $250,000 = $70,000. However, since $50,000 is the only option less than or equal to this amount, it represents a conservative lending limit.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
People Also Study
Federal Mortgage-Related Laws
23% of exam
Mortgage Loan Origination Activities
25% of exam
Ethics, Fraud & Consumer Protection
17% of exam
Uniform State Test Content
12% of exam
Previous Question
For USDA Rural Development loans, the income limit is typically based on what percentage of the area median income (AMI)?
Next Question
An underwriter discovers that a borrower's employment was terminated three days after the loan application was submitted, but before closing. What action should the underwriter take?