Loan-to-Value Ratio (LTV)
The ratio of the loan amount to the property value, used to size a loan and to decide whether PMI applies.
Loan-to-value is the loan amount divided by the property value, expressed as a percentage. Lenders use it to measure risk. For a purchase loan, the value used for underwriting is generally the lower of the contract price or appraised value.
On many conventional purchase loans, an LTV above 80 percent triggers private mortgage insurance. A 20 percent down payment on the lower purchase value produces an 80 percent LTV.
On the exam
Worked example
A 252,000 dollar loan on a 280,000 dollar value is a 90 percent LTV, so a conventional lender will generally require mortgage insurance.
Exam trap
Tested in
Real Estate Math (6% of the exam)
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This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.