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[M660]Mortgage Loan To Value

by Dave Lewis, Dav

Mortgage Factors: Loan to Value

When considering an application for a mortgage, lenders look at a number of factors. Regardless of the type of loan, they always look at loan to value ratios. The loan to value ration is simply a calculation that tells the lender and you the value of the property in question versus the amount of the loan. The ratio is determined by dividing the appraised value of the home by the amount sought for the home loan. For instance, assume a home is appraised at $200,000. If you apply for a $160,000 home loan, the loan to value is 80 percent.

In evaluating any loan of any type, lenders try to evaluate the risk factor. By risk, they are trying to ascertain the chance you will default on the loan and leave them holding the property. The loan to value ration is one of the factors used to determine risk. Simply put, the larger the loan to value ratio, the more risk the lender has of getting stuck with the property. The higher the risk level, the more picky the lender is going to be about other factors in the application process such as income, credit and so on.

The magic number with loan to value rations is 80 percent. If you can come up with sufficient cash to put down 20 percent on a property, the lender will consider the loan to be less risky. Put in practical terms, the lender knows you aren't about to walk away from your large cash down payment if you can help it. Thus, there is less risk in granting the loan.

If you are applying for a mortgage with a high loan to value ratio, you need to make sure you have excellent credit and a strong history of employment. An application with 90 or 100 percent loan to value is going to make a lender risk sensitive, so you can expect it to be much harder to get the loan.

In the current home financing market, the loan to value ratio is not as critical as it used to be. There are now a bevy of lenders that specialize in particular types of loans, particularly high loan to value ratio mortgages. If you are looking at a high loan to value ratio, a mortgage broker is your best option to finding the best deal.

Emotional involvement will be the biggest obstacle that most Connecticut homeowners face when applying for a refinance home loan mortgage. The problem is that when you meet with your mortgage lender to get a Connecticut refinance mortgage you will most likely become too emotionally invested in the process.

Don't get me wrong…you should be emotionally invested in the process, but you should always be able to take a step back and evaluate your goals and the costs that you will pay.

A great tool to help you slow down and think objectively while learning the true cost of your new mortgage payment is a Connecticut home mortgage calculator. Then you can wisely shop around to get a low interest rate mortgage in Connecticut, but be aware that you will have to constantly overcome your emotional triggers that tell you that you can afford to pay a mortgage payment that requires three of your four monthly paychecks.

The three major issues that we are seeing in Connecticut are homeowners who are applying for refinances are homeowners who…

...have two to three mortgages already
...have no equity in their home
...owe more on than the appraised value (this is called negative equity)

Those three issues can be mainly attributed to homeowners not making sound decisions. Before every spending decision you have to ask yourself the question: "Will this increase the resale value of the home?"

It's easy to get caught up in the emotion of the moment and start doing things to (and spending money on) a house to make it special just for you.
And you should definitely make your house a home...within reason. My advice is to only put money into things that make the home appreciate.

For example...

Instead of adding a paved basketball court.
Paint the bedroom walls a nice neutral color

Instead of adding a custom storage shed under your favorite tree.
Install new flooring or hardwood floors

Instead of purchasing unneeded expensive furniture.
Add professional landscaping around your home

If you follow the simple advice offered here you should be able to weather the home value storm that is brewing in our fine state.

Article Source : Pg. 76

About Author

Both Dave Lewis & Chris Rivers are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Dave Lewis has sinced written about articles on various topics from Finances, Mortgage Insurance and Mortgage. . Dave Lewis's top article generates over 18100 views. Bookmark Dave Lewis to your Favourites.

Chris Rivers has sinced written about articles on various topics from Other Business, Home Loan Mortgage and Other Business. Chris Rivers, a Connecticut mortgage broker, specializes in offering low interest rates for Connecticut refinance mortgage after bankruptcy even if yo. Chris Rivers's top article generates over 6600 views. Bookmark Chris Rivers to your Favourites.