A property appraises for $300,000 but the sales price is $320,000. The borrower obtains a loan for $240,000. What is the LTV ratio for underwriting purposes?
Correct Answer
B) 80%
LTV is calculated using the lower of the appraised value or sales price. Since the appraisal ($300,000) is lower than the sales price ($320,000), use $300,000. LTV = $240,000 ÷ $300,000 = 80%. This protects lenders from overvalued properties.
Why This Is the Correct Answer
LTV is calculated using the lower of the appraised value or sales price. Since the appraisal ($300,000) is lower than the sales price ($320,000), use $300,000. LTV = $240,000 ÷ $300,000 = 80%. This protects lenders from overvalued properties.
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