What is the maximum Loan-to-Value (LTV)?
FAQ: What is the maximum Loan-to-Value (LTV) mortgage rate.
Loan-to-Value, or LTV as it is commonly referred to, is the ratio of loan amount to the value of a property. The maximum LTV ratio may not exceed 100 percent of the “as-improved” value as determined by an appraisal. The loan-to-value ratio (or LTV) is one of the most important factors in your loan process. It is how the loan limits are determined and helps decide where your housing and debt ratios must fall for you to be approved. In addition it helps determine if you will have to pay Private Mortgage Insurance (PMI) and if you will be forced to escrow or not. It can also determine which fees and the amount(s) you will be charged for your loan.
One factor that determines your maximum LTV is your credit score. Lenders do not want to lend a high LTV if you have a low credit score. Generally, if your score is below 580, you will have a difficult time qualifying for 100% financing. Realize that your credit score is used to help determine your likelihood of defaulting on the loan. If a lender sees you as being more likely to default on the loan, then they don’t want to extend credit beyond what they will be able to recover if they are forced to foreclose.