What is Loan-To-Value ?
In the world of the mortgage, the LTV term is thrown around a lot, but what does it mean? Loan-to-value (LTV) is the amount of money you are borrowing as a percentage of the value of your home. Lenders use calculations of the loan and the value in both buying and refinancing. The math to determine your LTV may vary depending on the purpose of the loan.
Here are a couple of examples of how it works.
Buying a Home which appraises at the purchase price
- House price is $100,000
- Appraised Value is $100,000
- Down payment is $20,000
- Loan to value (LTV) is 80%
Refinancing a home with a single mortgage on it
- Home value: $100,000
- Loan balance: $95,000
- 5% Equity of $5,000
- 95% LTV
Conventional Loan: Up to 97% LTV
Conventional loans with 97% LTV, which means you have to make a down payment of 3 percent to qualify. 97% loans are available through most mortgage lenders, and often private mortgage insurance (PMI) is required. Compared with an FHA loan, conventional loans to 97 percent LTV to homeowners is recommended with high credit ratings. In most other cases with lower credit ratings, FHA loans are preferred.
FHA Loan: 96.5% LTV
FHA loans are loans insured by the Federal Housing Administration, an agency within the US Department Housing and Urban Development (HUD). FHA mortgage guidelines require a down payment of at least 3.5 percent. Unlike VA and USDA loans, FHA loans are not limited by military background or location - no special eligibility requirements. FHA loans can be an especially good fit for buyers with credit scores lower.
VA Loan: Up to 100% LTV
VA loans are loans guaranteed by the Department of Veterans Affairs US .. VA loan guidelines allow 100% LTV, which means that the initial payment is required for a VA loan. VA mortgages are available to certain people in active military service, veterans, military spouses, members of the Reserve or National Guard selected, cadets at the US Army, Air Force or Coast Guard Academy members, Naval Academy midshipman at the US World War II merchant, official US sailors Public Health Service official National Oceanic and Atmospheric Administration, among other groups.
USDA loan: Up to 100% LTV
USDA loans are loans insured by the Department of Agriculture of the US .. USDA loans allow 100% LTV - no down payment required. USDA loans are sometimes known as rural housing loans, but it is a misnomer, of all kinds. USDA loans are available in rural areas of the country, but are available for many owners of suburban housing, too.
WHAT IS YOUR maximum loan-to-value?
LTV is the ratio between the amount of money you borrow home much your home is worth. It is a simple formula, but the basis for most mortgage loans. If you can understand how it works LTV, you can better pick the mortgage that best suits your needs.Let me know if you have any question please feel free to contact me and we can start on your path to home ownership.
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