Origination ActivitiesQuestion 284 of 400
A borrower is purchasing a home appraised at $300,000 with a sale price of $290,000 and wants a 90% loan. On what value is the maximum loan calculated, and what is it?
a.On the appraised value; $270,000
b.On the lower of price or value ($290,000); $261,000
c.On the higher of price or value ($300,000); $270,000
d.On the down payment; $29,000
Explanation
Loan-to-value uses the lesser of the purchase price or appraised value, which is $290,000 here. At 90% LTV, the maximum loan is 0.90 times $290,000, or $261,000. Using the higher figure would overstate the allowable loan, so the lower value governs.
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