Why a St. Louis Home Buyer’s Loan-to-Value Ratio is Essential
Are you looking to purchase a new St. Louis home? Or maybe even your first St. Louis home? If so, then you are quickly realizing how important your loan-to-value (LTV) ratio when applying for your mortgage.
What is the Loan-to-Value Ratio?
An essential piece of the St. Louis mortgage process is understanding your loan-to-value ratio. Your LTV puts two important factors together with one another: the amount of money you have borrowed from your home’s lender divided by the price of the home when you purchased it (the purchase price).
When looking at these numbers together, lenders are able to calculate what your LTV ratio. Simply put, the better your LTV ratio, the more likely you will receive a better rate on your mortgage.
Why an LTV Ratio is Important
St. Louis home buyers might be wondering to yourself why this number is so important. After all, why does it really matter anyway?
Your loan-to-value ratio gives lenders a good look into your financial standing. This is similar to how a credit score does the same for your individual credit needs. The LTV ratio helps lenders understand how much risk they might be facing when investing with you and your mortgage.
When your LTV is high, lenders might be under the impression that both your credit and payment history are not very good. As a result, you might have a hard time finding a lender who wants to engage in investing with you through a mortgage. And if you do find a lender to work with, they might tack on high mortgage fees to save them in the case that you default on your loan.
How to Get a Good LTV Ratio
If you are looking to purchase a St. Louis home and want to ensure that your LTV is as strong as possible (meaning that it is as low as it can be), there are some steps that you can take.
First of all, one of the main things that you can do is put a larger down payment on your St. Louis home. When you put a bigger down payment on your home, you lower the amount of loan that you need which will in turn decrease your LTV ratio.
Another option is to reconsider the size and area of the St. Louis homes you are interested. By reducing the prices of the homes you are interested in, you are able to put down what is effectively a larger down payment.
Maintaining a solid loan-to-value ratio is a very important factor when it comes to the purchasing of your new St. Louis home. Not only does such a score improve your current financial situation, but it will also improve your future financial situation by ensuring that you are able to secure as low a mortgage rate as possible. This rate will be easier for you to pay off both now and five, ten, and fifteen years down the road.