In the process of deciding whether to extend a mortgage loan to a prospective borrower, lenders typically examine three elements, more commonly referred to as the "3 C's." Which of the following metrics does a bank use to evaluate the collateral piece of the loan agreement?

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The loan-to-value ratio (LTV) is a metric that evaluates the collateral piece of the loan agreement. It represents the percentage of the property's appraised value that the loan amount covers. The higher the LTV, the riskier the loan for the lender. A lower LTV provides more security for the loan since the property value covers a higher percentage of the loan. Therefore, the LTV is an essential factor for the lender to assess the loan's risk and decide whether to extend it to the borrower.

In the Process of Deciding Whether to Extend a Mortgage