Loan to value guidelines: 3CALoan
Everyone loves to buy a new home. While buying a home it’s easy to think about the fun aspects but the most important thing is obtaining a mortgage. From this loan to value guidelines blog, your all doubts will be clear.
How a loan-to-value ratio affects your mortgage payment
In order to obtain a mortgage, the lending process requires a comprehensive review of your finances in order to determine your loan eligibility. The loan-to-value ratio is one the factor that you should be aware of early on in the mortgage process. It has an important role in determining your monthly mortgage payment.
LOAN-TO-VALUE RATIO
The ratio of a loan to the value of an asset purchased is a financial term expressed by lenders and it is known as loan to value ratio. Banks and building societies usually use this term to represent the ratio of first mortgage line as a percentage of the total appraised value of real property. By dividing your loan balance by your home’s appraised value you can calculate your Loan-to-value ratio. The mortgage rate you are able to obtain will depend on your LTV ratio.
If you have a lower LTV that means you have more equity in your home then possibly you will qualify for a lower mortgage rate because you will be considered to be less risky. If you have a higher LTV then you will likely notice your mortgage rate is on the higher end. Since you’re considered more of a risk due to having less equity in your home.
Significance of Equity in your home
As we discussed above, the amount of LTV has a big impact on how low or high your mortgage rate will be and how much your mortgage lender will take a risk on you. The more equity you have in a home means you’re less likely to default on your mortgage and the less equity you have in a home means you’re more likely to default on your mortgage.
Understanding the impact of your down payment
The main factor to determine your ability to obtain a mortgage is LTV ratio. So, if you know less about mortgage loans then be sure you understand the impact of your down payment. Sometimes, people who qualify for a loan can put down as little as 3.5% of the price of a home.
While it may sound good that the smaller the down payment you’re able to put forward, the higher your LTV ratio will be. This may mean you’ll end up with a higher mortgage rate, or in some cases, the inability to qualify for a mortgage. You should also know that in addition to a higher mortgage interest rate. You’ll also likely be required to pay mortgage insurance to mitigate the risk you pose to your lender. You can also opt for VA loan if you don’t want to pay mortgage insurance. Because this loan doesn’t require mortgage insurance, even if you put low down payment.
How to Lower your LOAN-TO-VALUE RATIO
If you have a higher LTV then you don’t need to go for all the additional costs that come along with it. You just need to follow some ways to decrease your Loan-to-value ratio:
- Save up for a Bigger Down Payment.
- Home Appraisal Value
- Paying More Principal
Final Thoughts
We help our customers every step of the way. We prioritize informing and educating our clients about the Loan to value guidelines. Our client’s happiness and confidence upon closing a deal reflect our excellent quality services. To find out more information about manufactured home loans and how we can help, contact us at (818) 322-5626.
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