What is the exam-ready answer?
| Official syllabus topic | XI.B.3 General Concepts: Loan-to-Value ratio |
|---|---|
| Official PSI area | Real Estate Calculations |
| Published weight | 7% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual calculation. Follow the stated facts, units, time basis, and rounding instruction.
Formula and variables
| Symbol or term | Meaning |
|---|---|
| Loan | The amount financed, not the purchase price or total lifetime payments |
| Value | The property value or base stated for the calculation |
| LTV | The loan expressed as a percentage of value |
Step-by-step method
- Identify which of loan, value, LTV, and down payment the question asks for.
- Convert the percentage to a decimal before multiplying or dividing.
- Use loan divided by value for LTV, then algebraically rearrange only if the missing term changes.
- Find down payment from purchase price minus loan when the facts support that relationship.
- Check that a larger down payment produces a smaller LTV, not a larger one.
Georgia-specific distinction
Worked examples
Example 1: Find LTV
Scenario. A borrower obtains a $272,000 loan on a property valued at $340,000.
- LTV = loan / value.
- $272,000 / $340,000 = 0.80.
- 0.80 x 100 = 80%.
Answer. The LTV is 80%.
Reasonableness check. The loan is four-fifths of the value, so 80% is reasonable.
Example 2: Find loan and down payment
Scenario. A buyer purchases for $415,000 using a 75% loan based on the stated $415,000 value.
- Loan = $415,000 x 0.75 = $311,250.
- Down payment = $415,000 - $311,250 = $103,750.
Answer. The loan is $311,250 and the down payment is $103,750.
Reasonableness check. A 75% loan leaves 25% for the down payment, and 25% of $415,000 is $103,750.
Common exam traps
- Dividing value by loan and reporting a number above 100%
- Calling the down-payment percentage the LTV percentage
- Applying the LTV to the sale price when the question supplies a different underwriting value
- Using the original loan balance when the question asks for current LTV
Original practice questions with detailed explanations
These original instructional questions map to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Write the setup before opening the explanation.
Question 1A buyer contracts to pay $400,000 and the home appraises at $380,000. The lender will lend 80% of the lower of price or appraised value, and there is no other financing. What down payment is required?
- A. $20,000
- B. $76,000
- C. $80,000
- D. $96,000
Show answer and explanation →
Answer: D. $96,000
The loan is $380,000 x 0.80 = $304,000, so the buyer pays $400,000 - $304,000 = $96,000. $80,000 applies the 80% to the price, which the lender's rule does not allow here. $76,000 takes 20% of the appraisal but forgets the buyer still owes the full price.
Question 2An owner borrowed $300,000 on a home then valued at $375,000. The balance is now $270,000 and the current value is $400,000. What is the current LTV?
- A. 67.5%
- B. 72.0%
- C. 75.0%
- D. 80.0%
Show answer and explanation →
Answer: A. 67.5%
Current LTV uses current balance over current value: $270,000 / $400,000 = 67.5%. 72.0% pairs the current balance with the old value. 80.0% is the original LTV, which no longer describes the loan.
Question 3A buyer has $60,000 for a down payment and wants a single loan at 80% LTV. What is the highest price the buyer can pay?
- A. $48,000
- B. $75,000
- C. $240,000
- D. $300,000
Show answer and explanation →
Answer: D. $300,000
At 80% LTV the down payment is 20% of price, so price = $60,000 / 0.20 = $300,000. $75,000 divides by 0.80, treating the down payment as the loan's share. $240,000 is the loan amount, not the price.
Ready to move on?
You have this calculation down when all of these are true.
- I can identify loan as the numerator and value as the denominator.
- I can rearrange the formula to find loan or value.
- I can connect LTV and down-payment percentage without confusing them.
- I follow the stated value base rather than inventing one.
- I can check the result using the inverse relationship between down payment and LTV.
Recommended next lesson
Continue with Debt-to-Income and Buyer-Qualification Ratios. LTV measures the loan against the property, and the next lesson measures the payment against the borrower's gross monthly income, the other half of qualifying for that loan.
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