The ratio of your loan amount to the property's appraised value — the higher the LTV, the more risk the lender takes on.
Full Definition
LTV is calculated by dividing the loan amount by the property's appraised value or purchase price (whichever is lower). If you're buying a $400,000 home with a $320,000 loan, your LTV is 80%. Lenders use LTV to assess risk: the higher the LTV, the less equity the borrower has and the more the lender could lose if the borrower defaults. LTV above 80% on conventional loans typically requires private mortgage insurance (PMI). Maximum LTV varies by loan type: VA and USDA allow 100% LTV; FHA allows 96.5%; conventional is typically 97% (with PMI) to 95%. Lower LTV often means better interest rates.
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