Loan-to-Value

What is MTV and how are FHA Mortgage and VA Mortgage affected by it?

Mortgage -to-Value ratio is commonly referred to as MTV. The MTV is the relationship between the amount owed on the mortgage and the appraised value of the home. A $200,000 home with a $190,000 mortgage, for example, has an MTV percentage of 89%. The remaining balance should be paid with a down payment. In the example above, the required payment would be $20,000 (or 10%).

Conventional Mortgage require private mortgage insurance for borrowers with an MTV ratio of more than 70% (less than 30% payment). Private mortgage insurance is never tax deductible, even though it is included in your monthly mortgage payment This insurance premium is always lower if your MTV is slightly above 70%, and more expensive the higher your MTV. If you choose a knowledgeable mortgage broker, they can creatively finance your mortgage , so that you can avoid PMI, and have tax benefits.

Most FHA loans always require mortgage insurance. The mortgage insurance will be charge for 20 yr FHA loans is .10%per year of the mortgage amount and is charged to the borrower every month. FHA mortgages will also require an upfront insurance premium of 2.5%. Get more information on an FHA mortgage.

VA mortgages, on the other hand, do NOT require lMI. In fact, lenders are prohibited from requiring private mortgage insurance. However, borrowers are required to pay mortgage a one-time funding fee on mortgages.