WHAT IS A LOAN-TO-VALUE (LTV) & HOW DOES IT DETERMINE THE SIZE OF MY LOAN?
The loan to value ratio is the amount of money you borrow compared with the price of the home you are buying. Many different loans each have their own LTV limits. For example: With a 95% LTV loan on a home priced at $200,000, you could borrow up to $190,000, and would have to pay the difference of $10,000 as your down payment. 5TOP The LTV ratio reflects the amount of equity borrowers will have in their homes once they close the sale. The higher the LTV the less cash homebuyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require PMI or MIP (private mortgage insurance) be added to the loan payment in order to protect the lender against default .
