Loan to Value for Owner Occupied

Using the Credit Class from the previous page, determine the maximum amount you are prepared to loan.

For Non-Owner Occupied.

LTV means the loan to value. Thus if a house is appraised at $100,000, a 65% LTV loan would be $65,000. How about if the borrower can buy this house for $70,000? An institutional lender will lend based on the appraised value or purchase price, whichever is lower. Private lenders and hard money lenders usually go by the appraised value only.

However, we recommend against allowing the borrower to have no cash in the transaction, or even worse, walk away with cash in their pocket at closing. Even if they bought the property at 65% of the appraised value or less. On the other hand, if the house is genuinely worth $100,000 and you can make a first mortgage of $50,000 or less, it realistically would be hard for you to get hurt. It’s your money.