Suppose you plan to put a 20% down payment on a house and obtain a mortgage loan that is less than the size limit on conforming loans ($417,000) to finance the remainder of the purchase. Based on your understanding of the loan-to-value ratio, what is the maximum price that you could pay for a home with these restrictions in mind?

Question

Quizplus · Accepted Answer

The loan-to-value ratio is calculated as the loan amount divided by the home's purchase price. With a 20% down payment, the loan covers 80% of the home's price. Therefore, the maximum price is calculated as $417,000 / 0.80 = $521,250.

Suppose You Plan to Put a 20% Down Payment on a House