Carson is purchasing a $600,000 property by obtaining an 80/20 loan. How much is Carson financing?

The term "80/20 loan" refers to the loan-to-value (LTV) ratio. The "80" signifies that 80% of the property's purchase price is being financed through a mortgage loan, while the "20" represents the 20% down payment provided by the buyer. To determine the amount Carson is financing, you calculate 80% of the total purchase price.

Calculation: $600,000 (Purchase Price) × 0.80 (80% LTV) = $480,000.

Therefore, Carson is financing $480,000 and making a down payment of $120,000.

A. $120,000 represents the 20% down payment required from the buyer, not the amount being financed.

B. $420,000 is an incorrect calculation, corresponding to a 70% LTV ratio, which is not specified in the question.

D. $600,000 is the total purchase price of the property, not the portion being financed by the lender.

1. White, D. A. (2023). Maryland Real Estate Practice & Law (11th ed.). OnCourse Learning.

In the chapter on Real Estate Financing, the concept of Loan-to-Value (LTV) is defined as the ratio of the loan amount to the property's value or sales price. An 80% LTV on a $600,000 property explicitly means the loan amount is $480,000. (Specific reference typically found in Chapter 10, "Real Estate Financing").

2. University of Maryland, Colvin Institute of Real Estate Development. (Courseware for REAL 620: Real Estate Finance & Investment).

Course materials on mortgage underwriting fundamentals explain that an "80/20" structure denotes an 80% LTV first mortgage and a 20% equity or down payment position. The financed amount is always calculated based on the LTV percentage multiplied by the lesser of the appraised value or purchase price.

3. Maryland Department of Labor, Real Estate Commission. (2023). Maryland Real Estate Commission Code of Ethics and Standards of Practice.

While not a direct calculation guide, the principles of competence (COMAR 09.11.02.01.C) require licensees to be knowledgeable in fundamental financial calculations, including LTV, which is a core component of advising clients on purchase offers and financing contingencies. The 80/20 structure is a standard industry term representing this calculation.