The loan-to-value ratios are then calculated using this data. The more money a borrower puts into the transaction, the better the loan is for the mortgage lender. The optimal loan-to-value ratio for an uninsured home loan on owner-occupied residential property is 70 percent or less.This means that the property’s value would have to drop by more than 30% before the debt owed exceeded the property’s value, causing the borrower to default on their mortgage loan payments. Few residential properties have lost 30% or more in value due to nearly relentless inflation in house prices since the 1940s.Have a look at Kansas City Home Loans for more info on this.
Loan-to-value ratios of 70% to 80% are considered reasonable, but they do put the mortgage lender at greater risk. Lenders often compensate by raising interest rates marginally. Lenders will either raise the interest rate paid on these home loans or compel the borrower to include an outside insurer, such as the Federal Housing Administration or a private mortgage insurer, if the loan-to-value ratio exceeds 80%.
The lender then needs to know if the borrower has sufficient funds to complete the transaction (the closing). Are these assets in the borrower’s checking or savings account, or are they proceeds from the sale of his or her current real estate property? In the above situation, the mortgage lender is aware that the current loan is subject to a second closing. If the down payment and settlement funds are to be lent, the lender may want to be extra careful, as history has shown that the less money a creditor puts into a purchase, the more likely he is to default and face foreclosure.
The lender is therefore involved in the property’s intended use. When a home loan is used to buy or upgrade a property that the loan borrower will already live in, mortgage lenders are most at ease. This is because owner-occupants normally take pride in preserving their property and will continue to make monthly payments even though the economy is poor. An owner-occupant also understands that if they stop paying, they will have to vacate and find new housing.
CONTACT INFO :
Metropolitan Mortgage Corporation
7280 NW 87th Terrace Suite 200, Kansas City, MO 64153
Phone No. : 855-313-2480