Which factor does not typically affect the loan-to-value ratio (LTV)?

The loan-to-value ratio (LTV) is primarily determined by the relationship between the loan amount and the appraised value of the property. Specifically, it is calculated by dividing the loan amount by the appraised value and expressing it as a percentage. The appraised value of the property, the loan amount, and the down payment all play critical roles in determining the LTV.

The appraised value of the property is essential because it establishes the maximum potential value against which a lender is willing to loan funds. A higher appraised value can lead to a lower LTV, assuming the loan amount remains the same.

The loan amount directly influences the LTV calculation. A higher loan amount, relative to the appraised property value, results in a higher LTV, reflecting greater risk for the lender.

Similarly, the down payment made on the property affects the loan amount. A larger down payment reduces the loan amount needed, which in turn lowers the LTV.

On the other hand, while the borrower’s credit score is an important factor in overall loan approval and can impact the terms and interest rates of the loan, it does not factor into the calculation of LTV itself. LTV is strictly a measure of the loan amount relative to the property value