Qualifying
Loan-to-value (LTV)
The ratio of your loan amount to the home's value, expressed as a percentage. A lower LTV means more equity, better pricing, and — below 80% — no PMI.
What does loan-to-value mean?
LTV compares what you owe to what the home is worth: a $240,000 loan on a $300,000 home is 80% LTV.
It drives several things at once — your interest rate, whether you pay PMI, and how much you can borrow against equity.
Conventional PMI cancels at 78% LTV, and home equity lenders typically cap your combined LTV (first mortgage plus second) at 80–90%. Lowering LTV through a larger down payment or rising home value is one of the cleanest ways a Michigan owner improves loan terms.
A Michigan example
Say you buy at the Michigan median of about $285,000 with 5% down. You borrow $270,750, so your starting LTV is roughly 95% — well above 80%, which means PMI applies.
As you pay down principal and the home appreciates, the ratio falls. Reach 80% LTV and you can request PMI removal; at 78% it cancels automatically.
Common questions
What LTV do I need to avoid PMI?
80% or lower on a conventional loan — a 20% down payment. Above 80%, PMI applies until your balance falls to 78% LTV, when it cancels automatically. You can request removal once you reach 80%.
How do I lower my LTV?
Put more money down at purchase, pay extra toward principal, or benefit from rising home value. Any of the three shrinks the loan relative to the home's worth, which can shed PMI and earn a better rate.
What is combined LTV?
Your first mortgage plus any second loan, like a HELOC, divided by the home's value. Michigan equity lenders typically cap combined LTV at 80–90%, so you always keep a cushion of ownership.
Related terms