Loan-To-Value Ratio

The LTV (loan-to-value) ratio is calculated by dividing the appraised value of the home by the amount of the loan. This figure will be assessed during the underwriting process. As a general rule, borrowers who have lower LTV ratios pose less of a risk to the borrower, since they have more equity in their properties. Statistically, borrowers with lower LTV’s default less often, and when they do default, their properties are easier for lenders to sell. For these reasons, your LTV is an important factor in determining how much you can borrow.