Question

A lender determines that a homebuyer can afford to borrow $120,000 on a mortgage loan. The lender requires an 80% loan-to-value ratio. How much can the borrower pay for a property and still qualify for this loan amount?

Answer 1

The borrower pay $150,000 for a property and still qualify for this loan amount

Step-by-step explanation:

Data provided in the question:

The amount that the homebuyer can afford to borrow = $120,000

Loan to value ration required by the lender = 80% = 0.80

Now,

( Loan amount ) ÷ ( Value of the property ) = loan-to-value ratio

Thus,

$120,000 ÷ ( Value of the property ) = 0.80

or

Value of the property = $120,000 ÷ 0.80

or

Value of the property = $150,000

Hence,

The borrower pay $150,000 for a property and still qualify for this loan amount