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What is a loan-to-value ratio and how does it relate to my costs?

Lenders use the loan-to-value ratio as a measure to compare the amount of your first mortgage with the appraised value of the property. The higher your down payment, the lower your loan-to-value ratio.

Some lenders require borrowers to get private mortgage insurance where the loan amount is too close to the value of the home. If you have to get private mortgage insurance, it will increase your monthly costs. Be sure to compare the amounts, terms and costs of several loans, including the cost of mortgage insurance if it will be required.

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