{"id":347,"date":"2021-08-17T05:48:00","date_gmt":"2021-08-17T05:48:00","guid":{"rendered":"https:\/\/xlnc.info\/instamortgage\/?p=347"},"modified":"2023-10-19T06:20:59","modified_gmt":"2023-10-19T06:20:59","slug":"calculating-loan-to-value-ltv-ratio-for-your-home","status":"publish","type":"post","link":"https:\/\/xlnc.info\/instamortgage\/calculating-loan-to-value-ltv-ratio-for-your-home\/","title":{"rendered":"Calculating Loan-to-Value (LTV) ratio for your Home"},"content":{"rendered":"
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\"loan-to-value-ratio\"<\/div>\n<\/div>\n

Understanding the definition of Loan-to-Value (LTV), and how it impacts a mortgage approval, will help you determine what type of loan amount and program you may qualify for<\/p>\n

Since the LTV Ratio is a major component of getting approved for a new mortgage, it’s a good idea to learn the simple math of calculating the amount of equity you may need, or down payment to budget for in order to qualify for a particular loan program.<\/p>\n

The LTV Ratio is calculated as follows:<\/strong><\/p>\n

Mortgage Amount divided by Appraised Value of Property = Loan-to-Value Ratio<\/p>\n

*On a purchase transaction for a residential property, the LTV is calculated using the lesser of either the purchase price or appraised value.<\/p>\n

For Example:<\/strong><\/p>\n

Sally qualifies for a 96.5% Loan-to-Value FHA program, which means she’ll have to bring in 3.5% as a down payment. If the purchase price is $100,000, then a 96.5% LTV would = $96,500 loan amount. And, the 3.5% down payment would be $3,500.<\/p>\n

$96,500 (Mortgage Amount) \/ $100,000 (Purchase Price) = .965 or 96.5%<\/p>\n

In addition to determining what mortgage programs are available, LTV also is a key factor in the amount of mortgage insurance required to protect the lender from default.<\/p>\n

On a conventional loan, mortgage insurance is usually required if you have an LTV over 80% (one loan is more than 80% of the home’s appraised value). On that point, if you are currently paying mortgage insurance and think that your LTV is less than 80%, then it may be time to refinance, or call your lender to restructure the payment.<\/p>\n

Frequently Asked LTV Questions:<\/strong><\/p>\n

Q: Why do the lenders care about Loan to Value?<\/strong><\/p>\n

Bay Area lenders care about the LTV because it helps determine the exposure and risk they have in lending on a certain property. Statistics show that borrowers with a lower LTV are less likely to default on their mortgage. Also, with a lower LTV the lender will lose less money in case of a foreclosure.<\/p>\n

Q: Can I drop my mortgage insurance on an FHA loan?<\/strong><\/p>\n

The mortgage insurance on an FHA loan is structured differently than a conventional loan. On a 30 year fixed FHA loan, the monthly mortgage insurance can be removed after five years, as well as when the Bay Area borrower’s loan is 78% LTV.<\/p>\n

Q: What does CLTV stand for?<\/strong><\/p>\n

CLTV stands for Combined Loan To Value. The CLTV calculation is as follows: (1st Mortgage Amount + 2nd mortgage amount) \/ Appraised Value of Property = CLTV<\/p>\n

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