Exactly what does loan-to-value ratio mean and how does it connect with buying a home?

Exactly what does loan-to-value ratio mean and how does it connect with buying a home?

Another ratio FHA loan providers utilize whenever mortgage that is evaluating’ prospective purchase of a house may be the loan-to-value ratio or LTV. Like DTI, the LTV ratio is yet another monetary calculation that loan providers utilize, just this 1 happens nearer to the specific purchase of a residence you find attractive. Even though it may seem complicated, that it is pretty easy: it is the size of the mortgage you look for to have versus simply how much of the home you have in mind buying away from pocket. The amount is divided by you regarding the loan by the household’s value to obtain your response.

Here is a good example that will offer added quality. State the home you’re thinking about features a purchase cost of $250,000 and also you wish to put 5% toward it being a advance payment, or exactly what amounts to $12,500. (more…)