PSI Oklahoma Real Estate Practice Test

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Prepare for the PSI Oklahoma Real Estate Test with flashcards and multiple choice questions, all equipped with hints and explanations. Master the material and pass your exam confidently!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

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.