fha loan to value ratio

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We answer questions on a daily basis about FHA home loans, FHA refinance loans, and how these transactions are handled. One version of a common question about down payments and Loan-To-Value (LTV) ratios goes like this.

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BREAKING DOWN ‘Maximum Loan-to-Value Ratio’. The lender can sell the property and use the proceeds to repay themselves the borrowed money. The lender places a maximum allowable amount on the loan vs. the property value. If the loan is too big a portion of the property value, the bank wouldn’t be able to get their money back in the event of a borrower default.

Home Affordability. After all, the FHA was essentially created to absorb the risk inherent in handing out many loans that could be defaulted at any time. However, there are exceptions that can be made for borrowers who cannot adhere to the front or back-end ratios of 31% and 43%, respectively.

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The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of the asset. The LTV ratio is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always the real driver of underwriting and, ultimately, lending approval decisions, and the likelihood of a lender absorbing a loss increases.

Let’s assume you make a down payment of $60,000 on a home appraised at $300,000. The mortgage amount would be $240,000. The lender would divide the loan amount (0,000) by the appraised home value ($300,000) and multiply the result by 100. That makes the LTV ratio 80%.

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One qualifying metric home equity lenders use is closed loan-to-value (CLTV). CTLV is your current mortgage balance plus your desired home equity loan amount, divided by your home value. Discover Home Equity Loans has loan amounts from $35,000-$150,000 with up to 90% of the borrower’s CLTV (in some cases 95%).

bringing that borrower’s combined loan-to-value ratio to no greater than 115%. To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide.

Loan-to-Value or LTV is the amount of money you’re borrowing as a percentage of your home’s value. Lenders use loan-to-value calculations on both purchase and refinance transactions. The math.

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