Which of the answers provided is described as the percentage of the lesser of the appraised value or sales price that the lender will loan?

The concept in question describes the loan-to-value ratio (LTV), which is a critical measure used by lenders to assess risk when providing a mortgage. The LTV ratio compares the amount of the loan to the appraised value or sales price of the property, thus giving lenders insight into how much of their investment is being secured by the property's value.

Specifically, the LTV ratio is calculated by taking the loan amount and dividing it by the lower of the appraised value or the sales price of the property. This figure is expressed as a percentage and is pivotal in determining the terms of the loan, including interest rates and whether additional mortgage insurance might be required.

In the context of the other options, private mortgage insurance is related but represents insurance that protects the lender if the borrower defaults on the loan, typically necessary when the LTV is above 80%. Collateral refers to an asset pledged as security for a loan, and while it’s relevant to the loan process, it does not specifically communicate the relationship between the loan amount and property value the way LTV does. The front ratio, or housing ratio, refers to the percentage of a borrower’s gross monthly income that goes toward housing expenses, which is different from the concept of loan-to-value