Question

A buyer bought a house for $125,000. The house, which had originally sold for $118,250, appraised for $122,500. Based on these facts, if the buyer applies for an 80% mortgage, what will be the amount of the loan?

A)$100,000
B)$106,750
C)$94,600
D)$98,000

Answer 1

The amount of the 80% mortgage would be calculated based on the appraised value of the house, which is $122,500. Multiplying this amount by 0.80 yields a loan amount of $98,000.

Step-by-step explanation:

The student is asking how to calculate the amount of an 80% mortgage based on an appraised value. When a buyer applies for a mortgage, lenders often use the lower of the purchase price or the appraised value to determine the loan amount. Here, the house appraised for $122,500, which is less than the purchase price of $125,000. Therefore, the mortgage would be calculated based on the appraised value.

To find the amount of the 80% mortgage, we multiply the appraised value by 0.80:

$122,500 × 0.80 = $98,000

So, the amount of the loan the buyer would get for an 80% mortgage would be $98,000.