Finance
What does 'LTV ratio' stand for and why does it matter in Delaware real estate lending?
ALand-to-value; used to determine lot value separately from improvements
BLoan-to-value; indicates the proportion of the property value that is financed, affecting rate and PMI requirements✓ Correct
CLoan-to-tenant-value; relevant only in commercial lending
DLeverage-to-value; determines the rate of return on equity
Explanation
LTV (Loan-to-Value) ratio = Loan Amount ÷ Appraised Value. A higher LTV means more risk for the lender.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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