Certified Residential Appraiser Practice Exam

For a home purchase of $125,000 with a $95,000 loan, what would be the loan-to-value ratio (LTV)?

60% 68% 76% 82%

Correct Answer:

76%

Explanation:

To calculate the loan-to-value ratio (LTV), the formula used is: LTV = (Loan Amount / Purchase Price) × 100% In this scenario, the loan amount is $95,000 and the purchase price of the home is $125,000. Using the formula, we substitute the values: LTV = ($95,000 / $125,000) × 100% LTV = 0.76 × 100% LTV = 76% This result indicates that the loan amount is 76% of the property's purchase price, which aligns perfectly with option C. The LTV ratio is an important metric in lending as it helps lenders assess risk — a higher LTV may indicate higher risk because it implies less equity in the property.

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