The loan to value ratio (LTV) is the loan amount divided by the property’s value, expressed as a percentage: a $240,000 loan on a $300,000 house is an 80% LTV. Lenders use it to decide how much they will lend and at what price, and investors use it to figure out how much cash a deal needs and how much equity a seller really has.
That second use is the one most guides skip. If you wholesale, you read LTV from two sides: the seller’s LTV tells you whether a cash discount offer can even work, and your end buyer’s LTV tells you how much cash they need to bring to closing. This guide covers the formula, the related ratios (CLTV, LTC, and loan-to-ARV), the limits published by Fannie Mae and FHA, and three worked examples.
The loan to value ratio formula
The formula is simple:
LTV = loan amount ÷ property value × 100
The part that trips people up is which “value” goes in the denominator. On a conventional purchase, Fannie Mae’s Selling Guide section B2-1.2-01 defines value as the lower of the sales price or the current appraised value. On a refinance, it is the current appraised value. So if you buy a house for $200,000 and it appraises at $230,000, a purchase lender still calculates your LTV against $200,000. Buying below market does not give you extra borrowing power at the purchase closing. It only shows up later, when you refinance against a new appraisal.
Rounding matters too. Fannie Mae truncates the ratio to two decimal places and then rounds up to the next whole percent, so a 75.01% LTV is treated as 76%. If a program caps you at 75%, being a few dollars over is the same as being a full point over.
Quick examples of the math
- $160,000 loan ÷ $200,000 value = 80% LTV (20% equity)
- $193,000 loan ÷ $200,000 value = 96.5% LTV (3.5% equity)
- $150,000 loan ÷ $200,000 value = 75% LTV (25% equity)
Flip it around to solve for the maximum loan: max loan = value × max LTV. A 75% cap on a $260,000 appraisal means a loan of no more than $195,000. You will use that version far more often than the first one.
LTV vs. CLTV vs. LTC vs. loan-to-ARV
Investors run into four related ratios. They use different numerators or denominators, and confusing them is one of the fastest ways to misjudge how much cash a deal needs.
| Ratio | Formula | Who uses it | What it tells you |
|---|---|---|---|
| LTV | First loan ÷ value | Every mortgage lender | How leveraged the first lien is |
| CLTV (combined) | All liens ÷ value | Conventional lenders, HELOC lenders, you when screening sellers | Total debt against the property, and therefore the real equity |
| LTC (loan-to-cost) | Loan ÷ (purchase price + rehab budget) | Hard money and construction lenders | How much of your project cost the lender covers |
| Loan-to-ARV | Loan ÷ after-repair value | Hard money and fix-and-flip lenders | Whether the finished house can repay the loan if things go wrong |
CLTV adds every lien to the numerator. Fannie Mae’s CLTV definition (B2-1.2-02) includes the first mortgage, the drawn balance of any HELOC, and the unpaid principal of closed-end second loans. A homeowner with a $240,000 first mortgage and a $30,000 HELOC balance on a $300,000 house has an 80% LTV but a 90% CLTV. For a wholesaler, CLTV is the number that matters, because the seller has to pay off every lien at closing, not just the first one.
LTC and loan-to-ARV are how hard money lenders size a flip loan. Because the house is worth less today than after the rehab, they look at both what you are spending (cost) and what the house will be worth when finished (ARV), and they lend the lower of the two results. Your ARV estimate drives the second cap, so it pays to get good at calculating ARV from real comps before you ever talk to a lender.
Maximum LTV limits by loan program
Agency limits are published and change from time to time, so always check the current version. Here is what the primary sources say as of October 2026.
Fannie Mae investment property limits
The Fannie Mae Eligibility Matrix dated August 5, 2026 sets these maximums for investment properties underwritten through Desktop Underwriter (DU), fixed-rate or ARM. The same number applies to LTV, CLTV, and HCLTV.
| Investment property transaction | 1 unit | 2–4 units |
|---|---|---|
| Purchase | 85% | 75% |
| Limited cash-out (rate/term) refinance | 75% | 75% |
| Cash-out refinance | 75% | 70% |
Compare that with an owner-occupied 1-unit purchase, where the same matrix allows up to 97% on a fixed-rate loan. The gap is the whole point: lenders see rentals as riskier, so investors put more money down. Lenders can also layer their own stricter rules (“overlays”) on top, and credit score and reserves still apply. For how that 75% or 70% ceiling plays out when you pull equity from a rental, see our breakdown of cash-out refinancing a rental property.
FHA: 96.5% for owner-occupants
FHA loans are for buyers who will live in the property. HUD’s Handbook 4000.1 sets the maximum purchase LTV at 96.5%, and HUD’s Mortgagee Letter 2026-11 (October 8, 2026) restates the credit score tiers: borrowers with a minimum decision credit score at or above 580 are eligible for maximum financing, while scores between 500 and 579 are limited to 90% LTV. FHA matters to investors mainly through house hacking and because many retail buyers for wholetail or flipped homes use FHA financing.
PMI: the 80% and 78% marks
Conventional loans above 80% LTV usually carry private mortgage insurance. The Homeowners Protection Act gives borrowers two exits, which the CFPB summarizes on its page about removing PMI:
- Request cancellation at 80%. Once the balance is scheduled to reach (or actually reaches) 80% of original value, you can ask in writing. You need a good payment history, must be current, may need to show no junior liens, and may need to show the value has not declined.
- Automatic termination at 78%. The servicer must end PMI on the date the balance is scheduled to reach 78% of original value, as long as you are current.
“Original value” generally means the lower of the contract price or the appraised value at purchase. One catch for investors: the Act’s definitions (12 U.S.C. § 4901) cover a single-family dwelling that is the borrower’s principal residence. On a rental, these statutory rights do not apply, so the servicer’s and investor’s own policies control.
Hard money and DSCR: typical ranges, not rules
Private lenders set their own terms, so treat these as typical ranges you will see, not limits you can count on:
- Hard money (typical): A 2026 Texas lender guide from Harbert Group puts loan-to-cost at 70–80% for beginners and 75–90% for experienced borrowers, with loans capped at 65–75% of ARV. National lender Kiavi advertises up to 80% of ARV for qualified borrowers (checked October 2026). Expect the best terms to go to borrowers with a track record.
- DSCR loans (typical): One wholesale lender’s 2026 DSCR program matrix shows 80% for a purchase and 75% for rate/term and cash-out refinances on a single-family home, at a 700+ credit score and a DSCR of at least 1.00, before reductions. Lower scores, lower DSCR, and certain property types cut those numbers.
Reading a seller’s loan-to-value ratio as a wholesaler
When a seller calls, the single most useful question after “what’s the condition?” is “roughly what do you still owe?” Divide every lien (first mortgage, second mortgage, HELOC, and any recorded judgments or tax liens) by the as-is value and you have the seller’s CLTV. Their equity is simply the rest: a 40% CLTV means about 60% equity.
That one number sorts leads into lanes:
- Low LTV (roughly under 50–60%): Plenty of equity. A cash offer at your maximum allowable offer can still pay off the loan and leave the seller money. This is a classic wholesale deal.
- Middle LTV (roughly 60–80%): Run the numbers carefully. Your cash offer may barely cover the payoff plus closing costs, or fall short.
- High LTV (roughly 80% and up): A deep cash discount usually cannot close because the payoff is bigger than your offer. These are leads for subject-to, seller financing on any small equity, or a short sale, not a standard assignment.
These bands are rules of thumb, not lender standards. The real test is always the same: does your maximum offer, minus the seller’s closing costs, cover every lien? Confirm what the seller thinks they owe with a mortgage payoff statement and a title search, because sellers routinely forget a second loan, accrued interest, or a lien they never knew about.
Your end buyer’s LTV sets their cash needs
The other side of the deal is your buyer. If a flipper is financing with hard money at 90% of purchase price, they need the other 10% plus points, closing costs, and holding costs in cash. When your assignment fee pushes the price up, their down payment goes up too, and if the price pushes the loan past the lender’s ARV cap, the gap comes out of the buyer’s pocket. Knowing your buyers’ lenders’ LTV and ARV limits lets you price assignments they can actually close on, and it explains why some “approved” buyers vanish at the last minute.
Worked examples (all figures hypothetical)
Example 1: A flip financed on cost and ARV
HYPOTHETICAL: A flipper buys a house for $180,000 with a $50,000 rehab budget, so total cost is $230,000. Comps support an ARV of $320,000. The hypothetical lender offers 90% of purchase plus 100% of rehab, capped at 90% LTC and 70% of ARV. The loan is the lowest of the three tests:
| Test | Math | Result |
|---|---|---|
| Purchase + rehab terms | (90% × $180,000) + $50,000 | $212,000 |
| LTC cap | 90% × $230,000 | $207,000 |
| ARV cap | 70% × $320,000 | $224,000 |
| Loan amount | Lowest of the three | $207,000 |
The flipper needs $23,000 of the project cost ($230,000 − $207,000) in cash, plus points, closing, and holding costs. Loan-to-ARV is $207,000 ÷ $320,000 = 64.7%, comfortably under the cap.
Now suppose the lender’s appraiser says the ARV is $280,000. The ARV cap drops to 70% × $280,000 = $196,000, which is now the binding limit. Cash required jumps from $23,000 to $34,000. Same house, same rehab, $11,000 more out of pocket because of a $40,000 ARV difference. That is why a sloppy ARV can kill a deal at the closing table.
Example 2: A BRRRR refinance capped at 75%
HYPOTHETICAL: An investor following the BRRRR method buys a rental for $150,000, spends $40,000 on rehab, and pays $10,000 in closing and holding costs, for $200,000 all-in. After rehab it appraises at $260,000. The refinance lender caps the loan at 75% LTV.
- Maximum loan: 75% × $260,000 = $195,000.
- Cash left in the deal: $200,000 − $195,000 = $5,000, before the refinance’s own closing costs.
- If it appraises at $240,000 instead: 75% × $240,000 = $180,000, leaving $20,000 tied up.
Timing matters as much as the cap. Fannie Mae’s cash-out refinance rules (B2-1.3-03) generally require at least one borrower to have been on title for six months before the new loan is disbursed, and a first mortgage being paid off must be at least 12 months old. The main exception is delayed financing for properties bought with cash, but that exception limits the new loan to your documented initial investment (plus allowed closing costs), still subject to the cash-out LTV cap. In other words, delayed financing gets your purchase money back; it does not let you pull out the equity you created with the rehab right away. Plug your own numbers into the BRRRR calculator with the appraisal at, and below, your estimate.
Example 3: A high-LTV seller lead
HYPOTHETICAL: A seller’s house is worth about $250,000 as-is and $300,000 fully repaired, with an estimated $40,000 of repairs. The seller owes $235,000. Seller LTV: $235,000 ÷ $250,000 = 94%.
Using the common 70% rule with a $10,000 wholesale fee, the maximum allowable offer is (70% × $300,000) − $40,000 − $10,000 = $160,000. That is $75,000 short of the payoff before the seller pays a dime in closing costs. No negotiation fixes that gap. You can confirm with the MAO calculator.
Run the same house with a $90,000 balance (36% LTV) and the $160,000 offer pays off the loan with roughly $70,000 left for the seller before their closing costs. Same property, same offer, completely different deal.
The 94% seller is not a dead lead. They may be a fit for creative financing: taking the property subject to the existing loan, a short sale if they are behind and the lender will accept less, or a referral to an agent if a retail listing would net them more. Each of those has its own risks, starting with the lender’s due-on-sale clause on any subject-to deal.
Where LTV math goes wrong for beginners
- Trusting the seller’s payoff number. “About $120,000” often becomes $138,000 once a HELOC, late fees, and a judgment show up on title. Use CLTV, and verify with a payoff and title search before you sign up a buyer.
- Using an online estimate as “value.” Lenders use appraisals. If your ARV is built on an automated estimate, the lender’s ARV cap can come in tens of thousands lower, as Example 1 showed.
- Forgetting the “lower of” rule. On a purchase, a conventional lender uses the lower of price or appraisal. Your “instant equity” does not raise your purchase loan.
- Ignoring rounding and overlays. At 75.01%, you are at 76% in Fannie Mae’s math. Lenders can also be stricter than the matrix, especially for lower credit scores or 2–4 unit properties.
- Planning a BRRRR refinance too early. Seasoning rules can mean months of extra hard money interest. Ask your refinance lender for its seasoning rules before you buy, not after the rehab.
- Pricing assignments your buyer cannot finance. If your fee pushes the buyer’s loan past their lender’s LTC or ARV limit, they need more cash or they walk, and your deal falls apart days before closing.
- Forcing a cash offer on a high-LTV seller. Pressuring someone with no equity to accept a number that cannot pay off their loan wastes everyone’s time. Recognize the lane early and offer a structure that fits, or move on honestly.
LTV questions investors ask
What is a good loan-to-value ratio?
For a borrower, 80% or lower usually avoids PMI on a conventional loan and gets better pricing. For a wholesaler screening sellers, lower is better: the lower the seller’s CLTV, the more room there is for a cash discount.
Does LTV go down as I pay my loan?
Your current balance goes down with every payment, and rising values lower it further. But for PMI under the Homeowners Protection Act, the test uses original value, not today’s value. For a refinance, a new appraisal sets the value.
Is loan-to-ARV the same as LTV?
No. LTV uses today’s value or price. Loan-to-ARV uses the projected value after repairs, which is why flip lenders pair it with a loan-to-cost cap and lend the lower of the two.
Can I get 100% financing on an investment property?
Not from Fannie Mae, whose investment property ceiling is 85% for a 1-unit purchase. Some hard money lenders advertise up to 100% of purchase price and rehab for qualified borrowers, but they still cap the loan against ARV, so you will need cash for closing costs and any gap.
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