LTV Question

[krobin02]

Is LTV the amount of money loaned based on the contract price or the appraised price of the home?

[HHM]

Common sense would seem to say that LTV (loan to value) is based on the appraised price of the home. The few articles I have seen on the issue all indicate that LTV is usually based on the appraisal. One common aspect of appraisal fraud is to base the appraisal on the amount of down payment. For example, the more unscrupulous mortgage companies, once they know what your down payment is, will then seek an appraisal that forces you into having to pay PMI.

However lenders have the option of using the contract price. The general rule appears to be that the lender will use the lesser between the appraised value and contract price. So if the sale price (contract price) is lower than the appraised amount, most lenders will use the contract price for the LTV. If the appraised value is less than the contract price, the lender will use the appraised value for LTV.

Why do you ask?

[krobin02]

See next thread.

[freshstart2006]

LTV is based off of loan amount compared to the appraised value.

[MTG_BANKER_OH]

LTV is based off of loan amount compared to the appraised value.

When doing a purchase loan the LTV is based on the lower of the purchase price or appraised value. When doing a refinance it is based on the higher amount depending on the lenders seasoning situation some will use appraised value 1 day out others want 6 months to a year. There is no exception on this rule and it applies to all purcahse loans unlessyou are getting a hard money loan which the rate will be so high and the costs will be so much it will not be worth it. And they will on ly typically lend up to 65%-70% of the appraised value.