Low Down Payment Mortgage Programs

Low Down Payment Mortgage

The mortgage down payment is a barrier faced by first-time home buyers for generations. Even if you have steady employment and good credit scores, a large down payment can be much harder to achieve. 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

FHA Loans – 2017 FHA Loan Programs

FHA Loans

What is an FHA Loan?

An FHA loan is a mortgage program thats’s perfect for today’s first-time home buyers.  During the last decade, tightened housing regulations and poor wage growth have left many people feeling like owning a home is beyond their reach. More than ten million Americans can still hold on to their homeownership dreams thanks to flexible FHA loan requirements, which have helped over 40 million people achieve homeownership since 1934. Read More

FHA Mortgage Insurance

FHA Mortgage Insurance

Mortgage insurance is a protecton that guards lenders in case of applicant default.  Mortgage insurance is usually required on mortgages with a down payment that’s 20 percent or less.

Plainly stated, FHA MI is required for all FHA loan programs including FHA purchase loans, FHA refinance loans and FHA Streamline refinance loans. FHA guidelines for it’s insurance programs are what lenders use to determine if applicants are eligible for a loan.  These requirements are usually less demanding than other, non-insured mortgage programs. Read More

As seen in: