Maryland Home Improvement PSI Practice Exam

A lender will make an 80% loan-to-value loan on a property appraised for $72,250. If the buyer has $14,450 for a down payment, how much more will he need to meet the down payment requirement?

1. He has $1,000 more than he needs.

2. He has exactly the amount needed.

3. He needs an additional $250.

4. He needs an additional $1,250.

The correct answer is: He needs an additional $1,250.

To determine how much more the buyer needs to meet the down payment requirement, first, calculate the maximum loan amount based on the appraised value of the property and the loan-to-value ratio. With an appraised value of $72,250 and an 80% loan-to-value ratio, the lender is willing to provide a loan amount of: \[ 0.80 \times 72,250 = 57,800 \] Next, to find out the required down payment, subtract the loan amount from the total appraised value: \[ 72,250 - 57,800 = 14,450 \] This amount, $14,450, is the total down payment required. The buyer currently has $14,450 set aside for the down payment, meaning he has the exact amount necessary to meet the requirement. However, the initial assumption regarding the need for more funds can come from a misunderstanding of the finances. Since the buyer is set with the necessary amount, if the calculations indicated he needed more, it would suggest he had misunderstood his financial obligations or miscalculated the needed contribution. In summary, the buyer does not need any additional funds beyond the $14,450 he currently has to cover the required down payment of $