Mortgage Debt-to-Income Ratio – Conventional, FHA, VA, USDA Loan DTI

DTI Ratio

The Debt-to-Income Ratio, also known as “DTI Ratio”, are simply a couple of percentage representing applicant debt compared to their total income. Lenders use mortgage debt-to-income ratio percentages to evaluate a borrowers ability to repay them as agreed. Maximum debt-to-income ratios may vary based upon the mortgage program and the lender. Read More

Mortgage LTV Ratio: Loan-to-Value

LTV Ratio

The Loan-to-Value Ratio (LTV) is a percentage used to describe a loan amount compared to a property valuation. Lenders often use LTV Ratios to determine evaluate mortgage risk, determine applicant approval, and if they’ll be required to carry mortgage insurance. In general, higher LTV ratios represent increased risk to the lender. Therefore, high LTV mortgage loans are usually required to carry mortgage insurance. The LTV ratio is contingent on a property’s appraised value, as determined by the lender and mortgage program.

How is Mortgage LTV Calculated?

Loan-to-Value is calculated several ways, depending on the purpose of the mortgage. For a home purchase loan, the LTV is calculated based upon the sales price. For a refinance, the LTV is calculated based upon the appraised value of the home. The LTV ratio for either method is determined by dividing the loan amount by either the purchase price or total appraised value of the subject property.

Loan-to-Value Calculation

Example: Let’s assume you want to purchase a home that has an appraised value of $100,000. If you have $20,000 available for a down payment, then you’ll need to borrow another $80,000, or 80% of the purchase price.  Therefore, your ‘Loan-to-Value’ is 80%.

Conventional LTV Ratio Limits: Home Purchase

Loan to ValueMaximum Conventional LTV Ratios vary based upon several factors including mortgage type, loan purpose and the number of units in a property. Loan-to-value determines mortgage approval decisions within conventional loan requirements, and also if a borrower is required to carry Private Mortgage Insurance (PMI).

Conventional loans had maximum LTV limits of 80% historically, but that’s all changed.  These days, applicants can get conventional loans with LTV ratios of up to 97%.

Residence UsageFixed-Rate Mortgage (FRM)Adjustable-Rate Mortgage (ARM)
1 Unit Primary97% LTV90% LTV
2 Units Primary85% LTV75% LTV
3 Units Primary75% LTV65% LTV
4 Units Primary75% LTV65% LTV
1 Unit Second Home90% LTV80% LTV
1 Unit Investment85% LTV75% LTV
2 Units Investment75% LTV65% LTV
3 Units Investment75% LTV65% LTV
4 Units Investment75% LTV65% LTV

Conventional LTV Limits: Rate-Term Refinance

Rate-Term Refinance is considered any refinance where the borrower doesn’t get cash back.  These no-cash-out refinance options are used to lower a homeowner’s payments and interest rate. Rate-term refinance loans usually allow higher loan-to-values than for borrowers trying to take cash out.

Residence UsageFixed-Rate Mortgage (FRM)Adjustable-Rate Mortgage (ARM)
1 Unit Primary97% LTV90% LTV
2 Units Primary85% LTV75% LTV
3 Units Primary75% LTV65% LTV
4 Units Primary75% LTV65% LTV
1 Unit Second Home90% LTV80% LTV
1 Unit Investment75% LTV65% LTV
2 Units Investment75% LTV65% LTV
3 Units Investment75% LTV65% LTV
4 Units Investment75% LTV65% LTV

Conventional LTV Limits: Cash-Out Refinance

Cash-Out Refinance loans are used when a borrower has equity in a property they want to turn into liquid cash.  Because these loans often increase lender risk, they generally employ stricter LTV ratio requirements than no-cash-out refinance loans.

Residence UsageFixed-Rate Mortgage (FRM)Adjustable-Rate Mortgage (ARM)
1 Unit Primary80% LTV75% LTV
2 Units Primary75% LTV65% LTV
3 Units Primary75% LTV65% LTV
4 Units Primary75% LTV65% LTV
1 Unit Second Home75% LTV65% LTV
1 Unit Investment75% LTV65% LTV
2 Units Investment70% LTV60% LTV
3 Units Investment70% LTV60% LTV
4 Units Investment70% LTV60% LTV

FHA LTV Limits: Purchase or Refinance

FHA loans allow higher LTV ratios than most mortgage programs. Therefore, they’re considered a low down payment mortgage.  Loan-to-value ratios also affect how FHA loans are priced to the consumer, and if they’re required to carry FHA mortgage insurance.

Credit ScorePurchase Mortgage Refinance Mortgage
580+ FICO Score96.5% LTV85% LTV
Below 580 FICO Score90% LTV85% LTV

VA LTV Limits: Purchase or Refinance

While there’s no set maximum LTV for VA loans, it’s generally 100 percent.  VA loan-to-value may exceed 100 percent if the veteran chooses to finance the funding fee, discount points or energy efficient improvements.

 Purchase Mortgage Refinance Mortgage
All Credit Scores100% LTV + Points, Fees100% LTV + Points, Fees

USDA LTV Limits: Purchase or Streamline Refinance

USDA loans are a zero down payment mortgage program, which means they’re offered with LTV’s of 100%.  Technically, USDA loans are offered with a maximum loan-to-value of 102% because of the 2% “Guarantee Fee” may be rolled into the mortgage amount and paid over the duration of the loan.

 Purchase Mortgage Streamline Refinance
All Credit Scores102% LTV102% LTV

Conventional Loans – Conventional Conforming Loan Programs

Conventional loans have been considered the garden variety mortgage program for over 80 years. The term ‘conventional loan’ is defined as any mortgage that isn’t guaranteed or insured by a government agency. Today’s conventional loans may be either “conforming” or “non-conforming”, although ‘conforming loan’ programs are often loosely referred to as ‘conventional loans’. Conventional conforming loans are conventional programs that meet or ‘conform’ to guidelines set forth by the Federal Housing Finance Agency (FHFA), as well as the funding criteria for either Fannie Mae and Freddie Mac.

Read More

Conventional Loan Requirements and Conventional Mortgage Guidelines | 2018

Conventional Loan Requirements

What is a Conventional Loan?

A conventional loan by definition is any mortgage not guaranteed or insured by the federal government. Conventional loans can be either “conforming” or “non-conforming”, although conventional loan requirements generally refer to mortgage guidelines that ‘conform’ to government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac. Therefore, when you’re searching for more information on ‘conventional loans’, ‘conforming loans’ or ‘conventional conforming loans’, you’re likely referring to the same thing. Read More

Conforming Loan Limits are Conventional Loan Limits | 2017

Conventional Loan Limits

The Federal Housing Finance Agency (FHFA) recently announced that 2017 conventional loan limits would be raised to $424,100 for single-family homes.  This increase in these ‘conforming’ loan limits was the first since 2006. These limits may be exceeded if the property is located in a high-cost area. Read More

Smart Tips for Self-Employed Mortgage Applicants

Mortgage Application Tips

If you’re self-employed, getting approved for a mortgage is more complicated than getting approved with a traditional job paying W-2 income. There are usually few key differences that self-employed applicants should prepare for in advance to make the process smoother. Read More

District of Columbia Conforming Loan Limits

County Name
Area
1-Unit
2-Unit
3-Unit
4-Unit
DISTRICT OF COLWASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA-MD-WV$636,150$814,500$984,525$1,223,475

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