Mortgage Loans - LTV (Lending Risk Ratio)

When the purchase of your home, you must have all the money possible to pay down. Not only should save for the down payment, but also touch your personal savings, any stocks, bonds and property, and collect your gifts in the family. Usually, lenders require a down payment of at least 20% of the purchase price of the house, as well as requiring a ratio of at least 75% for your loan to be approved. What is the LTV ratio? The LTV, or the ratio of credit risk, is determined by dividing the amount of the mortgage loan (after deducting the down payment) for the value of the property. The higher the down payment, below this ratio will be. The lower the LTV the cheaper the cost of a mortgage, at the end, and you have the best chance to secure the loan. High LTV Disadvantages If your LTV is high, it may affect their ability to secure the loan in a myriad of ways. A high LTV is a risky situation in the perspective of the lender, as the high LTV loans are more at risk to default. If you are competing with other buyers, the lender will most always go with the lowest LTV and a larger down payment in cash. It can influence the probability of purchase. If you have a high LTV, there are also more likely going to do with higher interest rates and cost of additional insurance to protect the creditor. These extra costs will increase the cost of a long-term credit and make payments higher. If you do not have the money 20 percent down payment, some lenders require you to have a monthly income to qualify for a mortgage greater than 95 percent LTV. The loan is the same, but if your down payment is low, they will need more security. Prepare When obtaining a mortgage with a little preparation, and perhaps the patience, you can save 20 percent or more of the purchase price of the house and away the problems and additional costs. If you find this is not possible, it may be time to look at a house with a lower price. It 'better to be able to afford your home, in addition to wire in a situation with a probability of default. Here are our recommended Home Mortgage Lenders Online. Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.