What is Loan-to-Value Ratio When You Buy a Condo or Loft in Downtown Los Angeles?

When you buy a condo or loft for sale in DTLA, you’re probably going to need a mortgage loan to do it – and that’s perfectly normal. However, it does mean that you’ll have a lender looking at loan-to-value ratio, and that LTV plays a role in what kind of rate you’ll get on your mortgage (and even whether you qualify for a mortgage).

What is Loan-to-Value Ratio When You Buy a Condo or Loft in Downtown Los Angeles?

In technical terms, your loan-to-value ratio is a ratio between the amount of money you borrow to buy a condo or loft and the amount of money that home is worth.

If you buy a condo for $220,000, for example, and put down a $20,000 down payment, you’ll borrow $200,000 from the lender. The math works out like this:

$200,000 divided by $220,000 = 90.9%

Your loan-to-value ratio is 90.9% in that case.

Why Do Lenders Use LTV?

Lenders use loan-to-value ratio to determine how much risk they face if they let you borrow money. The higher the LTV is, the higher risk the lender thinks you are. That’s because there’s less of your own money on the line.

While logically, it makes sense to stick it out and make payments even if you’re going through tough times, lenders don’t want to assume any more risk than they have to. Lenders generally feel that when less of your money is at risk, you’re more likely to default on the loan. (Even though there are other consequences for defaulting on a loan, like a 10-year mark on your credit report for a foreclosure. Go figure!)

Most conventional private lenders require an LTV of around 80 percent to approve your loan. There are some exceptions, like loans backed by federal agencies (including VA loans).

Can You Lower Your LTV?

You can lower your loan-to-value ratio by coming up with a bigger down payment or by buying a less costly condo or loft.

Are You Buying a Loft or Condo for Sale in DTLA?

Call us at 213-254-7626 or get in touch with us online to start exploring your options when you want to buy a loft or condo in downtown Los Angeles.

While you’re here, check out our: