If buyers have $12,000 for a down payment on a $120,000 property, which loan-to-value (LTV) ratio would they negotiate?

If buyers have $12,000 for a down payment on a $120,000 property, which loan-to-value (LTV) ratio would they negotiate?

• A. 80%
• B. 90%
• C. 75%
• D. 100%

Answer: (B)

To determine the loan-to-value (LTV) ratio, you need to understand that LTV is calculated by dividing the loan amount by the appraised property value. In this case, the property value is $120,000, and the buyers have a down payment of $12,000. First, you calculate the loan amount by subtracting the down payment from the property value: Loan Amount = Property Value - Down Payment Loan Amount = $120,000 - $12,000 Loan Amount = $108,000 Now, to find the LTV ratio, you divide the loan amount by the property value and multiply by 100 to get a percentage: LTV = (Loan Amount / Property Value) × 100 LTV = ($108,000 / $120,000) × 100 LTV = 0.9 × 100 LTV = 90% Thus, the LTV ratio that the buyers would negotiate is 90%. This ratio signifies that the borrower is financing 90% of the property’s value with the loan, while the remaining 10% is covered by the down payment. A higher LTV may indicate higher risk to lenders, but it is a common ratio that buyers

To determine the loan-to-value (LTV) ratio, you need to understand that LTV is calculated by dividing the loan amount by the appraised property value. In this case, the property value is $120,000, and the buyers have a down payment of $12,000.

First, you calculate the loan amount by subtracting the down payment from the property value:

Loan Amount = Property Value - Down Payment

Loan Amount = $120,000 - $12,000

Loan Amount = $108,000

Now, to find the LTV ratio, you divide the loan amount by the property value and multiply by 100 to get a percentage:

LTV = (Loan Amount / Property Value) × 100

LTV = ($108,000 / $120,000) × 100

LTV = 0.9 × 100

LTV = 90%

Thus, the LTV ratio that the buyers would negotiate is 90%. This ratio signifies that the borrower is financing 90% of the property’s value with the loan, while the remaining 10% is covered by the down payment. A higher LTV may indicate higher risk to lenders, but it is a common ratio that buyers