Mortgage Loan Originator (MLO) Licensing Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Mortgage Loan Originator (MLO) Licensing Test. Study with flashcards and multiple-choice questions, each with hints and explanations. Get ready to succeed on your exam!

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.

If Tom's first mortgage is $200,000 and he is taking a second mortgage of $60,000 on a home appraised at $310,000, what is his Combined Loan-to-Value (CLTV)?

The correct answer is: 84%

To calculate the Combined Loan-to-Value (CLTV) ratio, you must first determine the total outstanding mortgage balances and the appraised value of the property. CLTV is calculated using the formula: CLTV = (First Mortgage + Second Mortgage) / Appraised Value In this scenario, Tom has a first mortgage of $200,000 and a second mortgage of $60,000. The total of these mortgages is: $200,000 + $60,000 = $260,000 The home is appraised at $310,000. Now, plug these values into the CLTV formula: CLTV = $260,000 / $310,000 Next, when you perform the division: CLTV = 0.8387 (approximately) To express this as a percentage, multiply by 100: CLTV ≈ 83.87% Rounding this percentage gives you approximately 84%. This indicates that Tom's combined loans constitute about 84% of the home's appraised value. The higher the CLTV ratio, the greater the risk to lenders, as it indicates more of the property's value is financed through loans. This understanding of CLTV is essential for a Mortgage Loan Originator when assessing the risk