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1 September, 08:17

A lender determines that a homebuyer can afford to borrow $120,000 on a mortgage loan. The lender requires an 80% loan-to-value ratio. How much can the borrower pay for a property and still qualify for this loan amount?

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  1. 1 September, 11:37
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    The borrower pay $150,000 for a property and still qualify for this loan amount

    Explanation:

    Data provided in the question:

    The amount that the homebuyer can afford to borrow = $120,000

    Loan to value ration required by the lender = 80% = 0.80

    Now,

    (Loan amount) : (Value of the property) = loan-to-value ratio

    Thus,

    $120,000 : (Value of the property) = 0.80

    or

    Value of the property = $120,000 : 0.80

    or

    Value of the property = $150,000

    Hence,

    The borrower pay $150,000 for a property and still qualify for this loan amount
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