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Loan-to-Value
Loan
to Value is a very common term in the lending industry and is one of
the major factors when determining what a rate will be on a specific
program. Loan to Value (LTV) defined refers to the loan amount
in relation
to a property's appraised value.
For example, a $90,000 loan on a home appraised at $100,000
would be a 90%
LTV loan. Also, a $270,000 loan amount on a home appraised at
$300,000
would equal 90% LTV.
Loan to Value is important for a number of reasons:
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Rates increase as LTV rises on most
products in the industry |
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As LTV rises, cash out restrictions take
affect on most A and Alt A products as well as significant rate
increases industry wide |
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High LTV loans (90%, 95%, 100%) are
available to borrowers with B credit or better |
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Low LTV loans often have the best rates
and terms |
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Low LTV loans often have Stated and No
Income Doc features available |
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All conforming and most Alt A loans
require Mortgage Insurance on all loans over 80% LTV |
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On all Sub Prime programs, a borrower's
rate is determined by their credit score and corresponding Loan
to Value of the proposed loan. |
As we have illustrated, Loan to Value is an assessment made on every
loan in
the industry. From this point a borrower's scores and specific
needs are
factored in to choosing a program. At Liberty National Funding,
we are
thorough in explaining how factors such as Loan to Value have very
real and
significant effects on the final rate and terms that are available.
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