What does LTV mean?

[Jerome Morelos]

Can someone explain what LTV is? Having trouble wrapping my head around it. Thanks!

[Steve Vaughan]

To expand a little on @Vinod Dasani definition of how banks interpret the 'Value' when they lend.

A lender will consider the 'value' at the buy to be the purchase price. No matter how good of a deal you are getting. So if you are owner-occupying, they will generally lend at an LTV ratio of 95% of the price. You'd need to put 5% down. Investment property usually has a requirement of 80-85% LTV or less. At least 20-25% down is required.

If you are refinancing, the value will be determined by an appraisal.  I have purchased investment homes at lot value ($23k) and still would have had to put down 25%.  The appraisal said 'buyer appears to be purchasing significantly below market value',  Doesn't matter at the buy - 'value' is what you bought at.  But after seasoning of 1 yr (in my case), I got a cash-out refi of $109k.  'Value' then was a proper appraisal.