A couple secured a home mortgage loan from a lender who appraised the property at $92,500. If the loan-to-value ratio on the property was 85%, what was the minimum amount the couple needed for the down payment?

Rationale

$13,875

To determine the minimum down payment required for the home mortgage, we first calculate the loan amount based on the loan-to-value (LTV) ratio. The couple needed to provide 15% of the appraised value as a down payment, which amounts to $13,875.

A ($6,166) YOUR ANSWER

This value represents 6.67% of the appraised value of $92,500, which is insufficient for the required down payment based on an 85% LTV ratio. The total down payment must cover the remaining 15% of the property's value.

B ($7,862) YOUR ANSWER

This choice calculates to approximately 8.5% of the appraised value of $92,500. Similar to the previous option, this amount does not meet the necessary 15% down payment requirement for the loan-to-value ratio set by the lender.

C ($10,882) YOUR ANSWER

This figure amounts to roughly 11.75% of the appraised value. While it is a larger down payment than the previous options, it still falls short of the 15% needed to satisfy the loan-to-value requirement of 85%, making it inadequate.

D ($13,875) CORRECT

This is the correct calculation of the required down payment, representing 15% of the appraised value of $92,500. This amount ensures that the loan does not exceed 85% of the property's appraised value, fulfilling the lender's requirements.

Conclusion

To secure a mortgage loan with an 85% loan-to-value ratio, the couple must provide a down payment of 15% of the appraised property value. The accurate calculation leads to a required down payment of $13,875, which is necessary to meet the lender's stipulations. Other options presented are either too low or do not satisfy the necessary percentage, emphasizing the importance of precise financial planning in securing home loans.

A couple secured a home mortgage loan from a lender who appraised the property at $92,500. If the loan-to-value ratio on the property was 85%, what was the minimum amount the couple needed for the down payment?

$13,875

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