Using the LTV formula, LTV equals 1st loan amount divided by the lesser of the sale price or appraised value. If the first loan is $180,000, the sale price is $210,000, and the appraised value is $190,000, what is the LTV?

Using the LTV formula, LTV equals 1st loan amount divided by the lesser of the sale price or appraised value. If the first loan is $180,000, the sale price is $210,000, and the appraised value is $190,000, what is the LTV?

• A. 94.7%
• B. 85.7%
• C. 90.0%
• D. 100%

Answer: (A)

LTV measures risk by comparing the first loan amount to the property's value, using the lesser of the sale price or appraised value as the denominator. Here, the loan is 180,000 and the lesser value between sale price (210,000) and appraised value (190,000) is 190,000. So LTV = 180,000 / 190,000 = 0.947..., which rounds to 94.7%. The other values come from using the sale price in the denominator (180,000 / 210,000 = 85.7%) or from a scenario where the loan equals the value (100%), which isn’t the case here.

LTV measures risk by comparing the first loan amount to the property's value, using the lesser of the sale price or appraised value as the denominator. Here, the loan is 180,000 and the lesser value between sale price (210,000) and appraised value (190,000) is 190,000. So LTV = 180,000 / 190,000 = 0.947..., which rounds to 94.7%. The other values come from using the sale price in the denominator (180,000 / 210,000 = 85.7%) or from a scenario where the loan equals the value (100%), which isn’t the case here.