A homeowner in Indianapolis has a property with a gross assessed value of $320,000. The property qualifies for Indiana's Homestead Standard Deduction of $48,000. The homeowner's first mortgage has an outstanding balance of $240,000. The lender requires that the loan-to-value ratio (LTV) not exceed 80% of the property's gross assessed value. By how much does the outstanding mortgage balance exceed the lender's maximum allowable loan amount based on the gross assessed value?
Correct Answer
D) The mortgage does not exceed the maximum allowable loan amount
Eighty percent of the $320,000 gross assessed value is $256,000, which is the lender's maximum allowable loan. Because the outstanding balance of $240,000 is less than $256,000, the mortgage does not exceed the maximum at all.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
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