South Carolina Real Estate Practice Exam

The correct choice is that the loan made on real property depends on the value of the property being purchased. In real estate transactions, the property itself serves as collateral for the loan, meaning that the lender holds a security interest in the property. This is crucial because if the borrower defaults on the loan, the lender has the right to take possession of the property to recover their losses.

The property’s value is assessed through appraisals and market analysis to ensure that it is sufficient to cover the loan amount. Lenders base their lending decisions on the market value of the real estate, as it provides a tangible asset that can be liquidated if necessary. This security is fundamental in real estate lending, as it provides assurance to lenders that they have an asset backing the loan, thereby influencing the approval and terms of the loan.

While the creditworthiness of the borrower, the interest rate, and the terms of the loan agreement are important factors in the overall loan process, they do not serve as the security for the loan itself. Instead, it is the value of the property that directly impacts the lender's decision-making regarding the loan amount and conditions.