The Combined Loan-To-Value (CLTV) ratio is used by banks and mortgage brokers when analyzing potential properties for clients so that they can decide which properties would best suit their financial needs and ability to make monthly mortgage payments without any additional funds from outside sources. For example, someone who owns $120,000 in unsecured debt — such as credit card bills — might find it very difficult to qualify for a $250k mortgage in California due to its relatively strict lending regulations regarding combined unsecured debt-to-income ratios (or CUI). However, this same person could qualify for $500k in Pennsylvania due to stricter lending regulations that penalize higher combined unsecures debts-to-income ratios more than in California. Therefore, he could choose between two similar properties based not only on aesthetics but also based upon his ability — as well as his lender’s willingness — to meet his financial obligations once he takes possession of his new home!A high CLTV ratio indicates a high risk of foreclosure; however, if there are no other loans on the property, it may be feasible to make all debt and maintenance payments each month. If there are other secured loans on the property, such as second mortgages or HELOCs, they may have an effect on whether or not buying this particular house would be risky. Calculating all secured loans’ CLTV ratios can help potential homebuyers understand what type of risk they would have on their bank statements if they were to purchase this particular property. If none of their secured loans have a high CLTV ratio, buying this particular house may be more affordable than they think.
