A Little Insight Into the World of Lending…

Loan-to-value ratio

The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

The term is commonly used by banks and building societies to represent the ratio of the first mortgage lien as a percentage of the total appraised value of real property. For instance, if someone borrows $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000 to $150,000 or $130,000/$150,000, or 87%. The remaining 13% represent the lender’s haricut, adding up to 100% and being covered from the borrower’s equity. The higher the LTV ratio, the riskier the loan is for a lender.

Loan to value is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always at the forefront of lending decisions, and the likelihood of a lender absorbing a loss increases as the amount of equity decreases. Therefore, as the LTV ratio of a loan increases, the qualification guidelines for certain mortgage programs become much more strict. Lenders can require borrowers of high LTV loans to buy mortgage insurance to protect the lender from the buyer default, which increases the costs of the mortgage.

The valuation of a property is typically determined by an appraiser, but a better measure is an arms-length transaction between a willing buyer and a willing seller. Typically, banks will utilize the lesser of the appraised value and purchase price if the purchase is “recent” with in 1–2 years.

Low LTV ratios (below 80%) carry with them lower rates for lower-risk borrowers and allow lenders to consider higher-risk borrowers, such as those with low credit scores, previous late payments in their mortgage history, high debt-to-income ratios, high loan amounts or cash-out requirements, insufficient reserves and/or no income. Higher LTV ratios are primarily reserved for borrowers with higher credit scores and a satisfactory mortgage history. Full financing, or 100% LTV, is reserved for only the most credit-worthy borrowers. The loans with LTV ratios higher than 100% are called underwater mortgages.

In the United States, conforming loans that meet Fannie Mae and Freddie Mac underwriting guidelines are limited to an LTV ratio that is less than or equal to 80%. Conforming loans above 80% are allowed but typically require private mortgage insurance. Other over-80% LTV loan options exist as well. The Federal Housing Administration (FHA) insures purchase loans to 96.5%, TD Bank, Toronto-Dominion Bank’s U.S. unit, which on Friday April 18th 2014 began accepting down payments as low as 3% through an initiative called “Right Step,” geared toward first-time buyers and low- and moderate-income buyers (97% LTV), and the United States Department of Veterans Affairs (VA) and United States Department of Agriculture (RD) guarantee purchase loans to 100%.

Properties with more than one lien, such as stand-alone seconds and home equity lines of credit (HELOC), are subject to combined loan to value (CLTV) criteria. The LTV for the stand-alone seconds and Home Equity Line of Credit would be the loan balance as a percentage of the appraised value. However, in order to measure the riskiness of the borrower, one should look at all outstanding mortgage debt.

In Australia, the term Loan to Value Ratio (LVR) is used. An LVR of 80% or below is considered to be low risk for standard conforming loans, and 60% and below for a no doc loan or low doc loan. Higher LVRs of up to 95% are available if the loan is mortgage insured.

In the UK, mortgages with an LTV of up to 125% were quite common in the run-up to the national / global economic problems, but today (November 2011) there are very few mortgages available with an LTV of over 90% – and 75% LTV mortgages are the most common.

Combined Loan To Value: (CLTV) ratio

Combined Loan To Value (ratio) (CLTV) is the proportion of loans (secured by property) in relaxation to its value.

The term “Combined Loan To Value” adds additional specificity to the basic Loan to Value which simply indicates the ratio between one primary loan and the property value. When “Combined” is added, it indicates that additional loans on the property have been considered in the calculation of the percentage ratio.

The aggregate principle balances of all mortgages on a property divided by its appraised value or Purchase Price, whichever is less. Distinguishing CLTV from LTV serves to identify loan scenarios that involve more than one mortgage. For example, a property valued at $100,000 with a single mortgage of $50,000 has an LTV of 50%. A similar property with a value of $100,000 with a first mortgage of $50,000 and a second mortgage of $25,000 has an aggregate mortgage balance of $75,000. The CLTV is 75%.

Combined Loan to Value is an amount in addition to the Loan to Value, which simply represents the first position mortgage or loan as a percentage of the property’s value.

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Did You Know????

In Scotland, home owners paint their front door red when they pay off their mortgage.

Red door

Image: kayugee/Flickr

Throughout history, a red front door has symbolized many things — the ancient Hebrews believed it would protect firstborn children from the angel of death; in the early days of America, it meant the home was a safe place for travelers to stop for the night. And according to Feng Shui, a red front door invites positive energy into a home.

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Tips to Put the SOLD in Your Real Estate!

Sometimes a house sell because it “feels right.”  How do you create that feeling?  Sometimes a house is passed by because it’s lacking that “thing.”  How do you avoid that feeling?  Mary Cook is a Chicago-based interior designer who outfits between 72-80 rooms a year.  She wrote the book “The Art of Space.”  These are the cliff-notes…

First, decide who you’re designing for.  You should be thinking of what kind of buyer is most likely to purchase your home and maximize on how the house works for them.

Second, when you’re designing the space, know what it’s going to be used for and fashion it as such.

Third, remember lighting is the diva that needs to shine.  Proper lighting or lack thereof can create a desired space or cause it to be looked over all together.

Fourth, Color.  Color can take a place from drab to fab, it can make you feel as though you’re standing in the most spacious of rooms or like the room is shrinking in on you.

Fifth, Patterns and texture.  You only have on chance to make a first impression and transforming something from flat to 3D can make it a memory they keep coming back to.

Sixth, the dirty little word we all dread when it comes time to sell… Clutter.  Let’s face it, if there’s clutter even the most spacious house can feel like a shoe.  Many prospective buyers lack the ability to see beyond the clutter and into the clear.  They need to see the space in order to envision where they’ll place their belongings.

Seventh, bringing harmony to the space is the main objective so scale and proportion are CRUCIAL.  Big spaces call for big components.  Smaller spaces can do without or run the risk of feeling crowded and cramped.

The perfect home is about balance and harmony among all it’s components, stationary and living alike.  For more information on this subject please refer to “The Art of Space” by: Mary Cook ($49.99).

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Buildable Vacant Land in Rockford – 8522 Nugent Ave. Rockford, MI 49341

8522 Nugent Ave. Rockford, MI 49341  |  MLS Number: 14017658

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Rockford Area – Premier 10+ Acre Parcel with Superior Location – Ready to be Built and has Perked in Past. Survey is Available. Walk Property Anytime. In Area of Higher Priced Homes. Bring your 4 Wheelers, Campers, and RVs! Comes with 3+ Acres of Wooded Area with Excellent Potential for Bow Hunting! Perfect Place for Raising & Riding Horses. No Home Association Fees.

County: Kent  |   Municipality: Grattan Twp

Lot Dimensions: 333*1329.83   |   Road Frontage: 333

Lot Square Footage: 442,570  |  Lot Acres: 10.16

Original List Price: $99,900  |  List Price/Acre: $9,340.55

Tax ID #: 411206226010

Taxable Value: 32,153  |   SEV: 32,900

Annual Property Tax: 1,571  |   Tax Year: 2013

School District: Rockford

Lot Description:   Buildable; Cleared; Level; Recreational; Tillable; Wooded

Mineral Rights:  Unknown

Directions: 131 N to exit 97 (10 Mile); Turn right onto 10 Mile; Continue onto E Division; Continue onto 10 Mile; Turn right on Nugent Ave; Property on the right.

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Meet the Team!

group croppedKevin – Pam – Sarah – Cayla – Lisa

Sold Home Team

2052 Celadon Dr.

Grand Rapids, MI 49525

Ph: 616-485-0506

Fax: 616-588-6357

E-mail: Admin@SoldHomeTeam.com

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3 Simple Ways to Help with Balancing Life.


Balance is defined as “a condition in which different elements are equal or in the correct proportions.” In this fast paced world, it would be an understatement to say it can sometimes be challenging to find balance between work and personal life.  You have to really take time and think about it, is pursuing the next big thing worth missing your child’s soccer game or a family cookout? In a 30 second speech given by Bryan Dyson, Former CEO of Coca Cola, he suggests that you should imagine life as a game in which you are juggling five balls in the air. These balls represent the different aspects of your life that need to be balanced; Work, Family, Health, Friends and Spirit.

Dyson goes on to explain that work is a rubber ball. If you drop it, it will bounce back. But the other four balls- Family, Health, Friends and Spirit are made of glass. If you were to drop one of these; they will get scuffed, marked, nicked, damaged or even shattered and will never be the same. This is a perfect illustration of why having balance is important and the good news is that achieving it is not as hard as you would think.

Here are 3 ways you can reach a healthy balance between work and your life outside the office:

  1. Use Teamwork

“Two heads are better than one” and “There’s no I in Team” are clichés for a reason. Stop trying to be everything for everyone because at the end of the day, you’re usually going to be the one stressed out. Instead, team up and figure out a strategy that will allow the team to prosper.  This is also a good tool to use out of the office.

  1. Create detailed to-do list

The key to finding balance is by maximizing your time at work, so that you can rest easy knowing everything is order once the day is over. Go above the normal list of daily tasks, identifying your long term tasks will keep things from stacking up. Create a list for both and organize your time in a way that will allow you to cross off tasks from both of them each day. You can also create lists for tasks that need to be done at home. Share that list with your family, so that your days off do not consist of household chores and other little tasks that generally get put off until you have free time.

  1. Turn the cell phone off once in a while.

Being on a smart phone has become second nature to all of us, so much so that we don’t realize that it’s keeping us from having true quality time with the people that are most important. Sit down and enjoy dinner with the family or get some quality “me” time and turn off the cell phone, the business will always be there when you get back.

Finding balance can be simple if you follow these steps, don’t allow work to control your life and remember that the time you spend with your friends and family is far more valuable in the long run.

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Weekend Line-Up for Open Houses!

1:00 – 2:30

10585  Stirrup Dr SE,  Caledonia, MI  49316

Superior Caledonia Location – 4+ Bed/4.5 Bath Beautifully Designed Arts&Craft Style 2Story On 3.6+ Acr.



10220  Wolven Ave NE,  Rockford, MI  49341

Rockford Executive 2 Story 4 Bed/ 4 Bath w 48 x 32 POLE BARN on 6.8 Acres. 400′ Rogue River Frontage.



3:30 – 5:00

9821  Sparta Ave NW,  Sparta, MI  49345

Superior Sparta Location – 10 Minutes to Downtown Grand Rapids – 4Bed / 4Bath on 8.5 Acres w Indoor Heated Pool



By Appointment

130  Kenton St SE,  Grand Rapids, MI  49548

Kentwood Ranch with 2 Bed / 1 Bath



1126  Prince St SE,  Grand Rapids, MI  49507

Prime Grand Rapids Area Location 3 Bed / 2 Bath 2-Story




Walk Anytime!!!

6150  Cannonsburg,  Belmont, MI  49306

Rockford Schools – 3+ Acres of Prime Property in Superior Location w Creek Frontage

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