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Loan-to-Value and Combined Loan-to-Value

QUICK SUMMARY

Loan-to-value is the loan divided by the value the program uses. On a purchase that value is usually the lower of price and appraisal. Combined loan-to-value adds the other liens. A second lien counts, even when it is deferred.

Loan-to-value, or LTV, is your loan amount divided by the home's value, shown as a percentage. On a purchase, the value is usually the lower of the price or the appraised value. Combined loan-to-value, or CLTV, adds any second liens on the same home, like a down payment assistance second or a home equity loan. These two numbers decide a lot: whether you pay mortgage insurance and for how long, how much a seller can contribute, how much cash you can take out on a refinance, and which programs you qualify for. Each loan program sets its own limits, and they're different for purchases, refinances and cash-out.

How LTV and CLTV are calculated

The basic math is simple. Divide the loan amount by the property value and multiply by 100. The details are in which loan amount and which value get used.

  • Loan amount: the amount on your note for the first mortgage. Some programs measure their limit before a financed fee is added, and some after (more on that below).
  • Value on a purchase: Fannie Mae uses the lower of the sales price or the current appraised value. FHA uses what it calls the Adjusted Value, which is the lower of the price, less any inducements to purchase, or the appraised value (HUD 4000.1 II.A.2.a).
  • Value on a refinance: generally the current appraised value. FHA uses the lower of your purchase price plus documented improvements or the appraised value if you bought the home less than 12 months before the case number was assigned. Tax value from the appraisal district isn't the value a lender uses. See what a mortgage appraisal checks.
  • CLTV: the first mortgage plus the balance of every other lien on the home, divided by the same value. Fannie Mae counts the drawn portion of a HELOC in CLTV (Selling Guide B2-1.2-02).
  • HCLTV: Fannie Mae's home equity combined LTV counts the full credit limit of a HELOC, whether or not you've drawn on it (B2-1.2-03). A HELOC you never use can still limit your options.

Fannie Mae also has a rounding rule: the ratio is truncated to two decimals and then rounded up to the next whole percent. So 94.01 percent is treated as 95 percent, and 80.001 percent as 80 percent (B2-1.2-01). Being a hair over a line can move you into the next band.

Why LTV matters

  • Mortgage insurance. Conventional loans above 80 percent LTV generally carry private mortgage insurance, and FHA's annual premium lasts 11 years when the starting LTV is 90 percent or less and the full loan term above 90 percent (HUD Mortgagee Letter 2023-05). See the mortgage insurance overview.
  • Seller concessions. Fannie Mae's limit on what a seller can contribute changes with LTV.
  • Cash-out limits. Each program caps how much of your value you can borrow on a cash-out refinance.
  • Program eligibility. The highest LTV bands come with extra rules about property type, loan type and borrower.
  • Pricing. On conventional loans, Fannie Mae applies loan-level price adjustments based on LTV and credit score (B2-1.2-01). How that shows up in a quote depends on the day and the lender.

The limits by loan type

These are agency rules. Automated underwriting can still decline a file that fits them, and a lender or investor can set tighter limits. When you talk to me, I'll tell you which layer a limit comes from.

FHA

  • Purchase: up to 96.5 percent of the Adjusted Value when your minimum decision credit score is 580 or higher. HUD limits scores from 500 to 579 to 90 percent LTV (HUD 4000.1 II.A.2.b). With me, FHA starts at a 580 score.
  • The 96.5 percent limit is how HUD's minimum required investment shows up in the loan amount: the borrower's own investment covers the rest of the Adjusted Value.
  • Limits are figured on the base loan amount, before the upfront mortgage insurance premium is financed. The note can then be larger than the base loan by the financed premium (HUD 4000.1 II.A.2.a.iii).
  • Cash-out refinance: up to 80 percent of the Adjusted Value, and CLTV is also capped at 80 percent. The 80 percent cap is the same in Update 17 of HUD's handbook, the version in effect today, and in Update 18, which lenders must use by Nov 10, 2026.
  • CLTV with government or HOPE grantee secondary financing: HUD sets no maximum CLTV for those seconds. Family member seconds can bring the CLTV up to 100 percent of the Adjusted Value. Other rules apply to each source.

Conventional (Fannie Mae)

  • The maximum LTV depends on credit score, product, number of units and occupancy, and Fannie publishes it in its Eligibility Matrix.
  • Purchases from 95.01 to 97 percent LTV, CLTV or HCLTV are allowed only on fixed-rate, one-unit principal residences, with no high-balance loans or ARMs. At least one borrower generally has to be a first-time homebuyer, unless the loan is HomeReady. The CLTV can go up to 105 percent when the second lien is a Community Seconds loan (B2-1.3-01).
  • If mortgage insurance is financed into the loan, the LTV includes it.
  • Freddie Mac sets its own limits in its Guide, and they're similar but not identical.

VA

VA doesn't require a down payment as long as the price isn't higher than the appraised value and you have full entitlement (VA purchase loan). On a cash-out refinance, VA's rule caps the new loan at 100 percent of the reasonable value, and any part of the funding fee that would push it over that has to be paid in cash (38 CFR 36.4306). Lenders and investors often set tighter cash-out limits than the rule.

USDA

The loan can't exceed the lesser of the appraised market value plus the upfront guarantee fee, or the price plus eligible acquisition costs (7 CFR 3555.103). That's why USDA loans can exceed 100 percent of the value by the guarantee fee.

Texas notes: cash-out and the 80 percent line

Texas has its own limit that sits on top of any program. A Texas home equity loan under Section 50(a)(6) of the Texas Constitution, which covers a cash-out refinance of your homestead, can't push the total of all debts secured by the home past 80 percent of its fair market value on the day the loan is made (Tex. Const. art. XVI, sec. 50(a)(6)(B)). That's why a Texas cash-out is effectively a CLTV test, and an existing HELOC or other lien counts against the room you have. Fannie Mae adds its own rules for these loans: they must be first liens on a one-unit principal residence that is your Texas homestead, and second homes, investment properties and two- to four-unit homes aren't eligible (B5-4.1-02). See how a cash-out refinance works.

In Tarrant County, the value on your appraisal district notice is a tax value. It can be higher or lower than what an appraiser finds, and it isn't used to set your LTV.

Fictional example

This example is made up to show the math. Real numbers come from your appraisal and your contract.

Tasha is buying a home in Benbrook for $280,000, and it appraises at $285,000. Her lender uses the lower number, $280,000. On FHA with a 640 score, the maximum base loan is 96.5 percent of $280,000, or $270,200. If she also gets an $8,400 assistance second lien from a state program, her CLTV is $278,600 divided by $280,000, or about 99.5 percent. Whether that works depends on the second lien's source and FHA's rules for it, so both approvals are read together. Her financed upfront premium makes her note larger than $270,200, but FHA measures the 96.5 percent on the base loan.

Five years later, she wants cash out. The home appraises at $330,000 and she owes $240,000, with no other liens. Texas caps all homestead debt after a cash-out at 80 percent of $330,000, or $264,000, before the costs of the new loan and any program limits are applied. If she'd opened a HELOC, its balance would come out of that room too.

Common mistakes and myths

  • "LTV is based on my price, period." On a purchase it's the lower of price or appraised value, so a low appraisal raises your LTV.
  • "My tax value sets my equity." Lenders use the appraisal, not the appraisal district.
  • "An unused HELOC doesn't count." Fannie Mae's HCLTV counts the full credit line.
  • "A down payment assistance second doesn't affect anything." It raises your CLTV, and each program has its own limits.
  • "79.5 percent and 80 percent are the same." Rounding rules and pricing bands can make small differences matter.
  • "PMI goes away when I think I have 20 percent equity." Removal rules use specific values and dates. See removing PMI.

What to have ready

  • Your contract price, or your best estimate of value on a refinance.
  • A mortgage statement for every lien on the home, including any HELOC with its credit limit.
  • Any down payment assistance or second lien terms you plan to use.
  • Your credit score range, since some programs tie LTV limits to it.

Next step

Not sure what your LTV and CLTV will look like on a purchase or a Texas cash-out? I'll run the numbers with you by program before you pay for an appraisal. Schedule a call, or when you're ready, start an application.

Related questions

Sources

Links checked Oct 21, 2026.

About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.

Equal Housing Opportunity.

Last reviewed: Oct 2026

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