Down Payment vs. Equity confusion

[Jay Coombs]

Ok, I thought I understood equity, down payments, and purchasing. But maybe not? 

Hypothetical deal incoming:

Purchase price 65k

Value 90k

Down payment $0 (not counting closing costs etc. it's an example!)

LTV: 72%

Okay, there's our deal. Now we call the lender, lender asks how much you're putting down. Of course, you say 0! You tell him that you have a great deal, and the equity is there already, and they ask how much you are putting down... Now you're confused because you thought you understood enough of lending to know that the LTV was the important piece, and you realize you don't know.

In this totally and completely hypothetical situation... What am I missing?

[Tom S.]

@Jay Coombs  The lender will always use the lower of the purchase price or the appraisal for determining the loan.  So in this example the value of the property becomes $65k, the price someone is willing to pay.  Of that $65k, the lender wants you to contribute a downpayment so it's not 100% financing.  They want your "skin in the game".

The companies that used to provide 100% financing with no buyer downpayment - they all went out of business during the 2008 crash!