Question

A lender will make an 80% loan-to-value loan on a property that is appraised for $72,250 and sells for $73,500. If the buyer has saved $14,450 for a down payment, how much more (if any) will he need in order to make the down payment required under the terms of this loan?

Answer 1

$1,250

Explanation:

We are given;

Loan to value ratio;LTV = 80% = 0.8

Appraised value of property = $72,250

Selling value of property = $73,500

Now, the formula for Loan to value ratio is;

LTV = Loan amount/Appraised value of property

0.8 = loan amount/72250

Cross multiply to get;

Loan amount = 0.8 × 72250 = $57,800

Now,we are told that he has saved $14,450.

Thus, total money raised including loan = $57,800 + $14,450 = $72,250

Since the selling value = $73,500, then,

Amount left for him to save in order to make down payment = $73,500 - $72,250 = $1,250