Tennessee Real Estate License Exam Practice Question
A low loan-to-value ratio indicates a
Correct Answer: C
Rationale: A low loan-to-value (LTV) ratio signifies that a borrower has made a substantial down payment, resulting in higher equity in the property. This means the homeowner owns a larger portion of the property outright, reducing lender risk.
Option A is incorrect; a low LTV indicates higher, not lower, equity. Option B is also wrong; a lower LTV reduces the risk of foreclosure since the borrower has more invested in the property. Option D misrepresents the concept, as greater leverage typically corresponds with a higher LTV, not a lower one. Thus, a low LTV clearly reflects higher equity.
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