The Loan to Value (LTV) ratio is often used in mortgage lending to determine the amount needed to make a down payment and whether the lender will lend to the borrower.
Smaller LTVs are better in the eyes of lenders, but require higher upfront payments from borrowers.
Most lenders offer mortgage and home equity applicants the lowest interest rate when the loan to value ratio is 80% or lower.
Mortgages become more expensive for borrowers with higher LTVs.
The Fannie Mae HomeReady and Freddie Mac Home Possible mortgage programs for low-income borrowers allow an LTV ratio of 97% (3% down payment), but require mortgage insurance (PMI) until the ratio drops to 80%.