This ratio is expressed as a percentage and is derived by dividing the mortage amount by the lesser of the selling price or appraised value.
- Using the selling price or appraised value of the property, determine the available or desired down payment and the desired mortgage amount that would be needed.
Home selling for $300,000, and the buyers have $40,000 available for a down payment.
$300,000 - $40,000 = $260,000 desired mortgage amount.
- Divide the mortgage amount by the selling price and convert the result to a percentage.
$260,000 / $300,000 = 0.87 or 87% which is the LTV ratio.
- Though you may be buying a property below the appraised value, and considering it a bargain, the lender will use the lower purchase price in this calculation.
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