Finance
What is the loan-to-value (LTV) ratio and why does it matter?
AThe ratio of loan payments to income
BThe ratio of the loan amount to the property's appraised value; affects interest rates, PMI, and loan approval✓ Correct
CThe ratio of property value to the local market
DThe comparison of two loan options
Explanation
LTV = Loan amount / Appraised value. A higher LTV indicates more lender risk. Higher LTVs typically result in higher interest rates, PMI requirements, and stricter underwriting standards. Most conventional loans require 80% or lower LTV to avoid PMI.
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