What down payment corresponds to the maximum FHA LTV of 96.5%?

• A. 3.5% down
• B. 5% down
• C. 10% down
• D. 0% down

Answer: (A)

LTV is the portion of the purchase price financed with the loan. If the maximum FHA LTV is 96.5%, that means you would be borrowing 96.5% of the price and paying the remaining 3.5% as a down payment. So the down payment corresponding to the maximum LTV is 3.5% of the purchase price. The other down payment amounts would reduce the loan-to-value (for example, 5% down would yield 95% LTV, 10% down would yield 90% LTV, and 0% down isn’t permitted for FHA).