New Jersey Real Estate Practice Exam Practice Question
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?
Correct Answer: D
Rationale: To determine the minimum down payment, first calculate the loan amount based on the loan-to-value (LTV) ratio. The LTV ratio of 85% means the couple can borrow 85% of the appraised value of $92,500.
Loan amount = 85% of $92,500 = $78,625.
The down payment is the difference between the appraised value and the loan amount:
Down payment = $92,500 - $78,625 = $13,875.
Option A ($6,166) and Option B ($7,862) underestimate the necessary down payment. Option C ($10,882) also falls short, as it does not account for the full 15% equity required. Only Option D accurately reflects the required down payment based on the LTV ratio.
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