We understand how frustrating it can be to search for a home in Austin. Half the battle is learning the key terms and what they mean in regards to Texas real estate. So each week we bring you Key Term Tuesday – our way of helping you decode the industry jargon that keeps you from owning your home search.
Loan to Value (LTV)
Loan to Value (LTV) is a financing term that expresses the percentage of money borrowed divided by the value of the property being financed. For example, a buyer who has a loan for $160,000 to purchase a home that is being sold for $200,000 would have an LTV of 80%.
Today, home buyers can borrow as much as 100% of the purchase price depending on their credit worthiness; however, higher LTVs have traditionally been linked with greater rates of default and foreclosure. Consequently, these loans come with higher interest rates, fees and more stringent credit requirements.
From the seller’s perspective, high LTV purchases are less likely to close because the buyer is using little or sometimes no money of their own in the deal. If you accept an offer from a buyer with a high LTV – low down payment – is less appealing than an offer with a higher down payment and a lower LTV loan. Remember in the Austin market today, buyers are competing against one another for the best homes.
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Our team has a combined 55+ years of experience helping home buyers understand the home buying process. Check out our approach to home buying to learn more about our team and how we work. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.