Formula card
LTV = loan amount / lesser of sale price or appraised value. Down payment = price - loan.
Worked example
The contract price is $400,000; the appraisal comes in at $390,000. The lender allows 80% LTV.
- Value used: the lower figure, $390,000
- Maximum loan: $390,000 x 0.80 = $312,000
- Cash needed for down payment: $400,000 - $312,000 = $88,000 (before closing costs)
Here is the trap
- Using the price when the appraisal is lower. The lender lends on the lower number.
- Points are a percent of the loan, not the price: 2 points on $312,000 = $6,240.
- PMI is typically tied to LTV above 80% on conventional loans.
LTV and down payment solver
Practice tool for exam-style math. Check your state and contract for local conventions.
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