What is Loan to Value (LTV)?

Some buyers are unfamiliar with the term LTV ratio.  This ratio is the amount of money required by the lender from the buyer in order to get a loan to purchase property.  This value is normally based on the sales price of the property.  For example, if the LTV ratio is 95% and the sales price of the home is $200,000, the buyer would be able to borrow only $190,000 and would be required make a down payment of $10,000.  This ratio reflects the amount of equity borrowers have in their home.  The higher the LTV ratio is, the less down payment required from borrow at closing for the property.  A LTV ratio of 80% or more normally requires the buyer to pay mortgage insurance.  Once the homeowner has more than 20% equity in their home, they can apply with their mortgage company to have the mortgage insurance eliminated from their monthly payments.