The loan to value (LTV) of your home describes the amount of equity you have in the property. For example, if you have a home worth $100,000 and you have a loan against the property of $70,000. If you divide 70,000 by 100,000 you get 0.70 or 70%. This is your loan to value.

This figure is an important criteria in the qualification process. All the loan programs you can apply for have a maximum LTV, which cannot be exceeded. Conventional, cash-out refinances can have up to 80% LTV while CSI Mortgage's in-house financing for single family residences has a maximum LTV of 70%.

Additionally, the maximum LTV allowed for any loan will decrease as the level of credit decreases. Therefore, if you have poor credit, but still wish to purchase a home, you will unfortunately pay for your poor credit through a slightly higher interest rate and a lower maximum LTV. What this means is you will have to bring in more money to close than someone with perfect credit.

Loan to value can also vary depending on the type of property. For example, for our in-house financing, CSI Mortgage sets 70% as a maximum for single, multi-family homes and commercial. While raw land loan to values cannot exceed 50%

A good rule of thumb for residential lending is "A" quality credit usually means a maximum LTV of 90-95%, "B" quality credit usually means 80-85% maximum LTV, "C" quality credit is 70-75% LTV and "D" quality which describes past foreclosures or bankruptcies can drop to 65-70% LTV.

Once again, paying monthly bills on time can be the best advice anyone can give you. Financing becomes easier and the defense mechanisms put up by lenders lessen because the companies feel you will be a good credit risk.

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