Real Estate Math
A home is purchased for $250,000 and appraises for $250,000. The buyer makes a down payment of 20% of the purchase price and finances the remainder with one mortgage. What is the loan-to-value (LTV) ratio?
- A80%
- B90%
- C70%
- D75%
Not B. 90% corresponds to a 10% down payment, not the stated 20%.
A is right. The down payment is 20% × $250,000 = $50,000, so the loan amount is $250,000 − $50,000 = $200,000. Because the purchase price and appraised value are both $250,000, the value used to calculate LTV is $250,000. LTV = loan amount ÷ value = $200,000 ÷ $250,000 = 80%.
