Glossary · UNDERWRITING

Loan-to-Value (LTV)

The ratio of loan balance to property value, expressed as a percentage. Lenders use LTV to set maximum loan sizes.

LTV = Loan Balance / Property Value. A $350,000 loan on a $500,000 property is 70% LTV. Lenders use LTV as a primary risk control - higher LTV means less equity cushion in a default scenario. Typical LTV limits: conventional residential 80%, DSCR rentals 75-80%, commercial refinances 65-75%, hard money 65-70%. In seller-financed deals, there is no formal LTV limit - the seller decides how much they are willing to carry. However, prudent buyers maintain enough equity cushion to support the eventual refinance. A deal acquired at 95% LTV requires significant appreciation before a conventional refi is possible.

Related Terms

DSCR

Debt Service Coverage Ratio - the ratio of NOI (or rent) to annual debt service, used by lenders to

Equity

The owner's stake in a property - the difference between the current market value and all outstandin

Hard Money

Short-term, asset-based loans from private lenders, typically used for acquisitions and rehab when s

Seller Financing

A transaction where the property seller provides the loan directly, eliminating the need for a tradi

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