How to Borrow on Property?

"Now the third area of evaluation or the third main point they are going to look at is also important. About as equally important as credit and that is the property that you are borrowing on. Now when they are looking at the property you are borrowing on, they are going to look at a couple of things. First they are going to say how typical is this property in the area and what type of property is it. So is it a single family residence, is it a duplex, is it a condominium, is it a condo hotel which is where they do a lot of vacation rentals, nightly rentals and things like that. Because with the banks, they are concerned primarily about getting their money regardless. So if they have to sell it, how easy is it going to be for them to sell. Okay. So the first thing they are going to look at on your property is how common is it in the area and the second thing they are going to look at is another acronym we are going to talk about and that is called LTV which stands for loan to value. That means how much I have borrowed against the property versus how much the property is worth. So if I have a house that is worth $100,000 and I've borrowed $80,000, I have an 80 percent loan to value because $80,000 is 80 percent of a $100,000. Does that make sense? Yes. If loan to value, they don't like to go above 80 percent with one loan. That is very risky with them. If they go higher than 80 percent, then they require that you have mortgage insurance. If it's a conforming bank, a conventional paper bank is going to require you have mortgage insurance for having over 80 percent loan to value on one loan. So you can either have mortgage insurance or the way to get around that if you have to go higher than 80 percent is to have a first at 80 percent and a second mortgage up to however high you need to go. Okay. So that is based on your property. That is the third thing that your bank is going to look at. Acronym there; the important one to remember is loan to value which is how much I have borrowed versus how much the house is worth."