Loan-to-Value Ratio (LTV)
Loan-to-Value Ratio is the percentage of a property's appraised value that is financed through the mortgage. It is calculated by dividing the loan amount by the property value.
LTV is one of the most important metrics in mortgage lending. A lower LTV indicates more equity and less risk for the lender, which often translates to better rates and fewer pricing adjustments for the borrower.
LTV is not the same as your down payment percentage — though they are related. A 10% down payment on a $300,000 home results in a 90% LTV. Certain programs and pricing tiers are based on specific LTV thresholds (e.g., 80%, 90%, 95%).
Why This Matters: Your LTV affects your rate, your mortgage insurance requirements, and your loan program eligibility. Knowing where you fall on the LTV scale helps you understand why your loan is priced the way it is.
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