PSI Oklahoma Real Estate Practice Test

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Prepare for the PSI Oklahoma Real Estate Test. Access flashcards and multiple choice questions, each with hints and explanations. Excel in your exam!

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A lender determines a homebuyer can afford $120,000 on a mortgage with an 80% loan-to-value ratio. What is the maximum property price?

$100,000
$120,000
$150,000
$200,000

The correct answer is: $150,000

To determine the maximum property price when given a loan amount and a loan-to-value (LTV) ratio, you can use the formula for LTV, which is: \[ \text{LTV} = \frac{\text{Loan Amount}}{\text{Property Value}} \] In this scenario, the lender has determined that the homebuyer can afford a mortgage of $120,000, and the LTV is set at 80%. To find the property value, you can rearrange the formula: \[ \text{Property Value} = \frac{\text{Loan Amount}}{\text{LTV}} \] Substituting in the given values: \[ \text{Property Value} = \frac{120,000}{0.80} = 150,000 \] Thus, the maximum property price the homebuyer can afford, based on an 80% loan-to-value ratio and a mortgage of $120,000, is $150,000. This calculation is crucial in real estate financing as it helps determine how much a buyer can look to spend on a property while adhering to lending guidelines.