Loan to Value for Non-Owner Occupied

Using the credit class from the previous page, determine the maximum amount you are prepared to loan.

For Owner Occupied.

LTV means the loan to value. Thus if a house is appraised at $100,000, a 65% LTV loan would be $65,000. How about if the borrower can buy this house for $70,000? An institutional lender will lend based on the appraised value or purchase price, whichever is lower. Private lenders and hard money lenders usually go by the appraised value only.

However, we recommend against allowing the borrower to have no cash in the transaction, or even worse, walk away with cash in their pocket at closing. Even if they bought the property at 65% of the appraised value or less. On the other hand, if the house is genuinely worth $100,000 and you can make a first mortgage of $50,000 or less, it realistically would be hard for you to get hurt. It’s your money.

Sometimes there are repairs needed to the house. Then you should escrow these monies with the closing agent, only to be released to the borrower after proof the repairs have been done.

Try our FREE Microsoft ®Excel spreadsheets for loan evaluation.

Credit Class/Property typeABCDEF
Single Family Residence80%80%70%70%65%65%
Mobile Homes75%75%70%65%65%60%
2-4 Unit multi-family75%70%70%65%60%60%
Apartment Building70%65%60%60%60%60%
Vacant Land65%65%60%55%50%50%

The interest rate you charge should depend on the risk of the loan. We recommend between 12-15% per year.

Remember, the above are guides only. Never let anyone tell you how to invest your money.


Someone with a FICO score of 560 will put down 12% cash to buy a single family home for investment purposes. The home appraises at $60,000 and they can buy it for a sales price of $50,000.

From the first chart their credit class is C.

From the second chart, they qualify for a 70% LTV loan. 70% of $60,000 is $42,000.

12% of $50,000 is $6,000. (Their cash down payment).

But $50,000-$42,000 is $8,000. So they are $2,000 short. You could insist they invest more cash, refuse to do the loan, or as it is fairly close, make the loan and charge a little more interest.