The Loan-to-Value (LTV) ratio is a key metric used by lenders to assess the risk of a mortgage loan. It represents the percentage of the property's value that is being financed.
A lower LTV ratio is better for borrowers, as it often leads to lower interest rates and a higher chance of loan approval. If your LTV is above 80%, you will typically be required to pay for Private Mortgage Insurance (PMI).
LTV Guidelines
- 80% or lower: Generally considered ideal. No PMI required.
- 80% - 95%: Common for first-time buyers, but usually requires PMI.
- Above 95%: Considered high risk. May require FHA loans or special programs.