A Tampa real estate licensee is helping a client understand loan-to-value ratios. The client is purchasing a $320,000 home and has been approved for a loan with an 85% LTV ratio. The client asks how this affects their down payment requirement. What should the licensee explain?
Correct Answer
A) The client needs a 15% down payment of $48,000
Correct: An 85% LTV means the loan covers 85% of the home value, requiring a 15% down payment ($320,000 × 15% = $48,000). Why not B: Confused LTV with down payment percentage. Why not C: LTV directly determines down payment requirements. Why not D: Down payment varies based on LTV ratio, not a fixed 20%.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
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