Mortgage Factors: Loan to Value

When applying for a home loan, there are a amount of factors you have to take into account. Loan to value is one of the key issues that will conclude either you get that loan.

Mortgage Factors: Loan to Value

When considering an application for a mortgage, lenders look at a amount of factors. Regardless of the type of loan, they all the time look at loan to value ratios. The loan to value ration is plainly a calculation that tells the lender and you the value of the asset in request versus the amount of the loan. The ratio is carefully by dividing the appraised value of the home by the amount sought for the home loan. For instance, assume a home is appraised at 0,000. If you apply for a 0,000 home loan, the loan to value is 80 percent.

In evaluating any loan of any type, lenders try to evaluate the risk factor. By risk, they are trying to ascertain the occasion you will default on the loan and leave them keeping the property. The loan to value ration is one of the factors used to conclude risk. plainly put, the larger the loan to value ratio, the more risk the lender has of getting stuck with the property. The higher the risk level, the more picky the lender is going to be about other factors in the application process such as income, reputation and so on.

The magic amount with loan to value rations is 80 percent. If you can come up with sufficient cash to put down 20 percent on a property, the lender will consider the loan to be less risky. Put in practical terms, the lender knows you aren't about to walk away from your large cash down payment if you can help it. Thus, there is less risk in granting the loan.

If you are applying for a mortgage with a high loan to value ratio, you need to make sure you have excellent reputation and a strong history of employment. An application with 90 or 100 percent loan to value is going to make a lender risk sensitive, so you can expect it to be much harder to get the loan.

In the current home financing market, the loan to value ratio is not as essential as it used to be. There are now a bevy of lenders that specialize in single types of loans, particularly high loan to value ratio mortgages. If you are finding at a high loan to value ratio, a mortgage broker is your best option to finding the best deal.

Mortgage Factors: Loan to Value

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Mortgage Refinancing: Loan-to-Value Ratio Basics

If you are in the process of refinancing your mortgage it is important to understand how loan-to-value affects your mortgage application. Here is what you need to know about your loan-to-value ratio.

The value of your home is an important aspect of your mortgage application. The loan-to-value ratio lenders use is based on the appraised value of your home and the amount you are requesting to borrow. To determine your loan-to-value ratio, divide the total amount of your loan by the value of your home from a recent appraisal.

Loan To Value Ratio Definition

For example, if your home is worth 0,000 and you are asking for 0,000 from your new mortgage lender, your loan-to-value ratio is .80 or 80%. Mortgage lenders have guidelines for approving mortgage loans and traditional lenders typically do not approve mortgage applications with loan-to-value ratios greater than 80 percent; if the lender is willing to approve a mortgage above 80% loan-to-value, that lender may require Private Mortgage Insurance in order to qualify.

Mortgage lenders consider homeowners with high loan-to-value ratios to be more of a risk for lending. Homeowners that own more equity in their homes are less likely to default on their mortgages than those that have little or no equity. In addition to requiring borrowers with high loan-to-value ratios to take out Private Mortgage Insurance, mortgage lenders charge these borrowers higher interest rates because of this increased risk. If you are a homeowner with a high loan-to-value ratio the lender may require you to pay for a new appraisal before approving your mortgage. To learn more about refinancing your mortgage and avoiding common mortgage mistakes, register for a free mortgage guidebook using the links below.

Mortgage Refinancing: Loan-to-Value Ratio Basics