Let’s suppose that a lender has established a 90% loan-to-value ratio cutoff as one of its...

Let’s suppose that a lender has established a 90% loan-to-value ratio cutoff as one of its primary underwriting criteria. If a borrower is willing to make a down payment of $125,000 on a home recently appraised at $550,000, which of the following best describes the lender’s decision on whether or not to approve the loan along this dimension?

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Expert Solution

Required maximum LTV = 90%

Current LTV = (550 ,000 - 125,000)/550,000

Current LTV = 77.27%

As current LTV is lower than maximum loan to value, so lender will approve the loan.

jeff jeffy answered 2 years ago

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