How is the Loan-to-Value (LTV) ratio calculated?
Correct Answer
B) Loan amount divided by the lesser of the appraised value or purchase price
LTV is calculated by dividing the loan amount by the lesser of the appraised value or the purchase price. Lenders use the lower figure to protect against overpaying relative to market value. For example, if a home is purchased for $200,000 but appraised at $190,000, the LTV is based on the $190,000 appraised value.
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