What is the loan-to-value ratio if Shalonda has a $325,000 home and a $49,000 down payment?

What is the loan-to-value ratio if Shalonda has a $325,000 home and a $49,000 down payment?

• A. The ratio is less than 80%
• B. The ratio equals 80%
• C. The ratio exceeds 80%
• D. The ratio is irrelevant

Answer: (C)

To determine the loan-to-value (LTV) ratio, you first need to calculate the amount of the loan that will be taken out against the property and then divide that by the total value of the property. In this case, Shalonda's home is valued at $325,000, and she is making a down payment of $49,000. The loan amount, therefore, can be calculated as follows: 1. Calculate the loan amount: - Loan Amount = Home Value - Down Payment - Loan Amount = $325,000 - $49,000 = $276,000 2. Now, calculate the loan-to-value ratio: - LTV Ratio = Loan Amount / Home Value - LTV Ratio = $276,000 / $325,000 3. Converting that to a percentage: - LTV Ratio = 276,000 ÷ 325,000 ≈ 0.848 or 84.8% Now, since the LTV ratio is approximately 84.8%, it clearly exceeds 80%. This is significant because many lenders consider a higher LTV ratio as higher risk, which could influence loan terms such as interest rates and mortgage insurance requirements. Therefore,

To determine the loan-to-value (LTV) ratio, you first need to calculate the amount of the loan that will be taken out against the property and then divide that by the total value of the property.

In this case, Shalonda's home is valued at $325,000, and she is making a down payment of $49,000. The loan amount, therefore, can be calculated as follows:

1. Calculate the loan amount:

• Loan Amount = Home Value - Down Payment

• Loan Amount = $325,000 - $49,000 = $276,000

2. Now, calculate the loan-to-value ratio:

• LTV Ratio = Loan Amount / Home Value

• LTV Ratio = $276,000 / $325,000

3. Converting that to a percentage:

• LTV Ratio = 276,000 ÷ 325,000 ≈ 0.848 or 84.8%

Now, since the LTV ratio is approximately 84.8%, it clearly exceeds 80%. This is significant because many lenders consider a higher LTV ratio as higher risk, which could influence loan terms such as interest rates and mortgage insurance requirements. Therefore,