One of the most important part of the average real estate purchase is normally the mortgage financing necessary to obtain the property.
The average home buyer does not have the assets to purchase property without some type of mortgage financing. Even those home buyers who can afford to pay for the entire property with cash, it is sometimes not a good idea to use mortgage loans for tax and investment purposes.
Mortgage programs typically set limits on the loan amounts available for purchases. These loan-to-value (LTV) limits are based on the property’s value, type and program.
For example, conforming programs–which normally have the best rates and terms–impose the following LTV limits on purchase loans:
- Single-family home or condominium unit, owner-occupied: 97%
- Two-unit residential property, owner-occupied: 90%
- Three-unit residential property, owner-occupied: 80%
- Four-unit residential property, owner-occupied: 80%
- Single-family, 2nd homes: 90%
- Single-family and two-unit residential, investment (NOO): 80%
- Three-unit & four-unit residential, investment (NOO): 75%