Reviewed by Jeff Shin, NMLS #1041652. Updated .
Also called: LTV.
How to calculate LTV
LTV is the loan amount divided by the property value. On a purchase, Fannie Mae uses the lower of the sales price or the appraised value. That matters when an appraisal comes in under the contract price: the LTV goes up even though your down payment did not change. See what an appraisal gap does before closing.
How LTV changes the cost
The CFPB explains that borrowers with a higher LTV are usually offered a higher interest rate, and that LTV decides whether you need private mortgage insurance or a government-backed loan. On conventional loans, Fannie Mae and Freddie Mac price in steps by LTV and credit score through loan-level price adjustments.
LTV limits that come up often
- PMI removal. Under the Homeowners Protection Act, you can ask to cancel PMI when your balance is scheduled to reach 80% of the home’s original value, and it ends automatically at 78%.
- FHA cash-out. HUD caps an FHA cash-out refinance at 80% of the home’s value.
- FHA mortgage insurance. HUD sets how long the annual MIP lasts by the LTV at closing.
Example
A $400,000 home with a $40,000 down payment leaves a $360,000 loan. $360,000 ÷ $400,000 = an LTV of 90%.
Illustrative example only, not a quote. Actual APR and terms vary.
Related terms
- Private mortgage insurance (PMI)
- Loan-level price adjustment (LLPA)
- FHA mortgage insurance premium (MIP)
- Debt service coverage ratio (DSCR)
Related on BankPricer
Sources
Definitions on this page are summarized from the agencies that set the rules. Lenders can add stricter requirements. Checked October 7, 2026.
Not sure which of these applies to you?
That is usually the actual question. Send the situation rather than the product name — purchase or refinance, primary or investment, price range, and timeline — and you get the structures that fit, with what each one costs.