Michigan Real Estate Exam Practice Question
A home is purchased with an 80% LTV loan. The buyer is making a $15,000 down payment, paying 1 point, and typical year-end loan and other closing costs. What is the sale price of the home?
Correct Answer: A
Rationale: To determine the sale price of the home, we start with the loan-to-value (LTV) ratio of 80%. This means the loan covers 80% of the home's value. If the buyer makes a $15,000 down payment, that represents 20% of the sale price. Therefore, the total sale price can be calculated as follows:
Sale Price = Down Payment / (1 - LTV) = $15,000 / 0.20 = $75,000.
Option B ($93,750) incorrectly assumes a higher sale price, leading to an inaccurate down payment calculation. Option C ($100,000) miscalculates the down payment as 20%, while Option D ($118,750) significantly overestimates the value, misaligning with the provided down payment.
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