| When applying for a home loan, there are a number of | | | | The higher the risk level, the more picky the lender is |
| factors you have to take into account. Loan to value is | | | | going to be about other factors in the application |
| one of the key issues that will determine whether you | | | | process such as income, credit and so on. |
| get that loan. | | | | The magic number with loan to value rations is 80 |
| Mortgage Factors: Loan to Value | | | | percent. If you can come up with sufficient cash to put |
| When considering an application for a mortgage, | | | | down 20 percent on a property, the lender will consider |
| lenders look at a number of factors. Regardless of the | | | | the loan to be less risky. Put in practical terms, the |
| type of loan, they always look at loan to value ratios. | | | | lender knows you aren't about to walk away from |
| The loan to value ration is simply a calculation that tells | | | | your large cash down payment if you can help it. Thus, |
| the lender and you the value of the property in | | | | there is less risk in granting the loan. |
| question versus the amount of the loan. The ratio is | | | | If you are applying for a mortgage with a high loan to |
| determined by dividing the appraised value of the | | | | value ratio, you need to make sure you have excellent |
| home by the amount sought for the home loan. For | | | | credit and a strong history of employment. An |
| instance, assume a home is appraised at $200,000. If | | | | application with 90 or 100 percent loan to value is going |
| you apply for a $160,000 home loan, the loan to value | | | | to make a lender risk sensitive, so you can expect it to |
| is 80 percent. | | | | be much harder to get the loan. |
| In evaluating any loan of any type, lenders try to | | | | In the current home financing market, the loan to value |
| evaluate the risk factor. By risk, they are trying to | | | | ratio is not as critical as it used to be. There are now a |
| ascertain the chance you will default on the loan and | | | | bevy of lenders that specialize in particular types of |
| leave them holding the property. The loan to value | | | | loans, particularly high loan to value ratio mortgages. If |
| ration is one of the factors used to determine risk. | | | | you are looking at a high loan to value ratio, a |
| Simply put, the larger the loan to value ratio, the more | | | | mortgage broker is your best option to finding the best |
| risk the lender has of getting stuck with the property. | | | | deal. |