Loan-to-value and down payment on the real estate exam

LTV = loan / property value, where lenders use the lower of the price or the appraisal. The down payment is price minus loan, not appraisal minus loan.

Updated 2026-09-23 · 1 source · By the RealEstateExamKit team
Formula card

LTV = loan amount / lesser of sale price or appraised value. Down payment = price - loan.

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Worked example

The contract price is $400,000; the appraisal comes in at $390,000. The lender allows 80% LTV.

  1. Value used: the lower figure, $390,000
  2. Maximum loan: $390,000 x 0.80 = $312,000
  3. Cash needed for down payment: $400,000 - $312,000 = $88,000 (before closing costs)

Here is the trap

  • Using the price when the appraisal is lower. The lender lends on the lower number.
  • Points are a percent of the loan, not the price: 2 points on $312,000 = $6,240.
  • PMI is typically tied to LTV above 80% on conventional loans.

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Sources

  1. Pearson VUE - Texas Real Estate Candidate Handbook (national salesperson outline, effective March 1, 2025) (accessed 2026-09-23)
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