Certified Apartment Portfolio Supervisor (CAPS) Practice Exam 2026 - Free Module 2 Practice Questions and Study Guide

Lenders primarily focus on the Loan-to-Value (LTV) ratio and the Debt Coverage Ratio (DCR) when evaluating loans.

The Loan-to-Value ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. It is a critical measure because it helps determine the risk of a loan; a higher LTV ratio indicates a higher risk for the lender, as it suggests the borrower is financing a larger portion of the property with debt.

The Debt Coverage Ratio is another essential metric that assesses a property’s ability to generate enough income to cover the debt obligations associated with it. This ratio indicates to the lender whether the property's income is sufficient to cover the loan payments, thereby gauging the risk of default.

By focusing on these two calculations, lenders can make informed decisions regarding the approval and amount of a loan, as they reflect both the risk inherent in the property's value and the borrower’s ability to repay the loan. This approach ensures that loans are not only secured adequately but also sustainable based on the projected income from the property.