A purchase at $480,000 has a first mortgage of $384,000 and the seller will carry a $24,000 second. The program caps CLTV at 85%. Using $480,000 as the property value, what is the CLTV and does it meet the stated 85% cap?
Correct Answer
C) CLTV is 85%, exactly meeting the stated CLTV cap
C. The combined ratio is 85%, meeting this stated cap. Include both liens: $384,000 + $24,000 = $408,000. Divide by the stipulated $480,000 value: $408,000 ÷ $480,000 × 100 = 85%. Scope and exceptions: The 85% limit and denominator are supplied facts, not a universal program rule. Other eligibility checks remain. Fannie Mae generally uses the lower of price or appraised value for this calculation. Source: B2-1.2-02, Calculation of the CLTV Ratio — https://selling-guide.fanniemae.com/sel/b2-1.2-02/combined-loan-value-cltv-ratios
Why This Is the Correct Answer
C. The combined ratio is 85%, meeting this stated cap. Include both liens: $384,000 + $24,000 = $408,000. Divide by the stipulated $480,000 value: $408,000 ÷ $480,000 × 100 = 85%. Scope and exceptions: The 85% limit and denominator are supplied facts, not a universal program rule. Other eligibility checks remain. Fannie Mae generally uses the lower of price or appraised value for this calculation.
Why the Other Options Are Wrong
Option A: CLTV is 80%, because a seller-carried second lien is not counted in that
80% counts only the first mortgage and omits the seller’s second.
Option B: CLTV is 90%, so the second has to be reduced by roughly $24,000
90% would require $432,000 of combined debt at this value.
Option D: CLTV cannot be computed until the second lien has been recorded
The proposed balances permit this calculation before recording.
Exam Tip
Combined means include subordinate financing; a ratio is only one eligibility test.
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