Calculating the LTV

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Question:

Can LTV be calculated using either loan amount to appraisal or loan amount to sales price? If so, are you allowed to use either intermittently, or should the LTV be calculated the same way consistently?

Answer:

For purchase money transactions, is it always the lesser of the actual acquisition cost or the estimate of value. See Regulation H - Appendix C - Interagency Guidelines for Real Estate Lending Policies.

"Value means an opinion or estimate, set forth in an appraisal or evaluation, whichever may be appropriate, of the market value of real property, prepared in accordance with the agency's appraisal regulations and guidance. For loans to purchase an existing property, the term "value" means the lesser of the actual acquisition cost or the estimate of value."

First published on BankersOnline.com 11/16/09