A home is valued at $400,000. It has a $240,000 first mortgage and a new $60,000 HELOC credit limit. If the calculation uses the full HELOC limit, what is the combined loan-to-value ratio?
Correct Answer
B) 75%
Why this is correct: The Combined Loan-to-Value (CLTV) ratio is calculated by dividing the total amount of all liens (first mortgage + full HELOC credit limit) by the property value. As per the original explanation: First mortgage = $240,000; HELOC limit = $60,000. Total liens = $300,000. Property value = $400,000. CLTV = ($300,000 / $400,000) * 100% = 75%. Why the other choices are wrong: "60%" is wrong because it uses only the first mortgage LTV ($240,000 / $400,000), ignoring the HELOC. "80%" is wrong; it might come from an incorrect sum of liens (e.g., $320,000) or a miscalculation. "100%" is wrong as it would imply total liens equal the property value ($400,000), which is not the case here. Exam tip: For CLTV, remember to include the full credit limit of a HELOC (or second lien) in the total loan amount, not just the current balance, unless the question specifies otherwise.
Why This Is the Correct Answer
Why this is correct: The Combined Loan-to-Value (CLTV) ratio is calculated by dividing the total amount of all liens (first mortgage + full HELOC credit limit) by the property value. As per the original explanation: First mortgage = $240,000; HELOC limit = $60,000. Total liens = $300,000. Property value = $400,000. CLTV = ($300,000 / $400,000) * 100% = 75%. Why the other choices are wrong: "60%" is wrong because it uses only the first mortgage LTV ($240,000 / $400,000), ignoring the HELOC. "80%" is wrong; it might come from an incorrect sum of liens (e.g., $320,000) or a miscalculation. "100%" is wrong as it would imply total liens equal the property value ($400,000), which is not the case here. Exam tip: For CLTV, remember to include the full credit limit of a HELOC (or second lien) in the total loan amount, not just the current balance, unless the question specifies otherwise.
More Mortgage Knowledge Questions
In a closing-readiness check, a risk reviewer sees facts tied to TILA Truth in Advertising. What should the file reflect?
In a training scenario, a trainee asks which official source controls FHA single-family origination policy. What action best follows the rule?
A compliance analyst compares the file facts with LTV Ratio Calculation during a licensing team review. Which conclusion is accurate?
A branch manager asks about a loan file because a trainee asks which official source controls FHA single-family origination policy. What should happen?
The loan team compares the file facts with ARM Cap Structures during a borrower follow-up call. Which conclusion is accurate?
A borrower has a 30-year fixed-rate mortgage with monthly principal and interest of $1,450. Property taxes increase, and taxes are paid through escrow. What can happen to the total monthly payment?
A loan has an outstanding principal balance of $240,000 and a 6% annual interest rate. Using simple monthly accrual, how much interest accrues for one month?
An annual escrow analysis for a current borrower shows a $780 shortage. One month's escrow payment is $600. The servicer elects to require repayment over the shortest installment period permitted by Regulation X for this shortage. What schedule is permitted?
What does an amortization schedule show for each scheduled payment?
A monthly principal-and-interest payment is $1,800, of which $1,250 is interest. How much principal is paid that month?
People Also Study
Federal Mortgage-Related Laws
24% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
The MLO compares the file facts with Conforming Loan Limits during a borrower follow-up call. Which conclusion is accurate?
Next Question
during a conventional and conforming loan rules review, a sponsorship reviewer identifies an issue involving conventional and conforming loan rules. Which response is most compliant?