Finance
The loan-to-value (LTV) ratio is calculated as:
ADown payment divided by purchase price
BLoan amount divided by appraised value (or purchase price, whichever is lower)✓ Correct
CMonthly payment divided by gross income
DTotal debt divided by total assets
Explanation
LTV = Loan Amount / Appraised Value (or purchase price, whichever is lower). A lower LTV means more equity and less risk for the lender. Most conventional loans require an LTV of 80% or lower to avoid PMI. Higher LTV loans carry more lender risk and may require mortgage insurance.
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