How is the Loan-to-Value (LTV) ratio calculated?
Correct Answer
B) Loan amount divided by the lesser of the appraised value or purchase price
LTV is calculated by dividing the loan amount by the lesser of the appraised value or the purchase price. Lenders use the lower figure to protect against overpaying relative to market value. For example, if a home is purchased for $200,000 but appraised at $190,000, the LTV is based on the $190,000 appraised value.
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Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
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