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11 July, 12:13

Let's suppose that a lender has established a 90% loan-to-value ratio cutoff as one of its primary underwriting criteria. If a borrower is willing to make a down payment of $125,000 on a home recently appraised at $550,000, what best describes the lender's decision on whether or not to approve the loan along this dimension?

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  1. 11 July, 12:26
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    77.27% or

    (17/22) %

    The loan will accepted

    Explanation:

    property value 550,000

    haircut 125,000

    550,000 - 125,00 = 425,000 mortage value

    425,000/550,000 = 77.27% = (17/22) %

    The ratio is below the cutoff, so it is within the boundaries the lender expect. The loan will be given.
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