Why is the loan-to-value ratio important?
Your loan-to-value (LTV) shows your equity in the property.  Your equity is basically the amount of the property you own, expressed as a monetary figure.  Another way of thinking of your equity is that, it's the amount of money you'd received if you sold your property at its valued price, less what you'd have to return to your lender to repay the loan.  Example: $100,000 value minus $50,000 to repay loan = $50,000 equity.   Your LTV and equity are crucial because common wisdom among lenders is that the higher the LTV (and the lower the equity), the higher the risk of a borrower defaulting on his or her loan.  Thus, low equity loans present lenders with greater risk, forcing them to increase their costs.

The loan-to-value ratio (or LTV) is one of the most important factors in your loan process.  It is used to determine the limits within your housing and debt ratios; and where they must fall for you to be approved.  It can also determine which fees and the amount (s) you will be charged for your loan.  Furthermore, it determines whether you must pay Private Mortgage Insurance (PMI) and use an impound/escrow account.

How do I calculate my loan-to-value ratio?
Your loan-to-value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio.  For example, a house valued at $100,000 which you intend to purchase with a $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV of 80 percent - that is, the loan represents 80 percent of the value of the house.  The value of your property is its appraised value or the amount you pay for the property (the market value), whichever is lower.  In the initial stages of qualification and approval, your property's value is understood to be an estimate.  It will be confirmed, if necessary for your particular loan, by a professional appraiser.

The loan to value of LTV ratio of a property is the percentage of the property's value that is mortgaged.  If you divide the mortgage amount by the lesser of either the appraised value or the selling price, you get the LTV.  There are differing lender requirements used to determine whether a loan will be granted with a certain LTV.  It's quite common for owner occupied residences to get loans at an LTV of 80%. However, when a property is to be an investment, lenders will frequently require higher LTV's.

Examples:
$400,000 appraised value of a home
$200,000 mortgage on the property
$200,000/400,000 =.50 or 50% Loan to Value Ratio

How to determine the available or desired down payment and the desired mortgage
Using the selling price or appraised value of the property, determine the available or desired down payment; and the desired mortgage amount 

A home selling for $400,000 and the buyers have $50,000 available for a down payment.
$400,000 - $50,000 = $350,000 desired mortgage amount.
Divide the mortgage amount by the selling price and convert the result to a percentage.
$350,000 / $400,000 = 0.87 or 87% which is the LTV ratio (Loan to Value Ratio)

 James Kimmons, About.com - Thanks James, (Loan-To-Value Ratio) information is simple and to the point!
Mortage Center http://loan.yahoo.com  Thank you!