How Loan-to-Value Ratios Work
Your loan-to-value ratio compares how much you're borrowing to what your home is worth. This number determines your loan terms, interest rate, and whether you need mortgage insurance.
For purchase loans, lenders use whichever is lower: the appraised value or your purchase price. Say you're buying a house for $400,000 but it appraises for $420,000. Your lender will use $400,000 to calculate your LTV ratio.
If you're putting down $40,000 on that $400,000 home, you're borrowing $360,000. Your LTV ratio is 90% ($360,000 divided by $400,000).
Refinance loans work differently. The lender only looks at the current appraised value, not what you originally paid. If your home now appraises for $450,000 and you owe $300,000, your LTV is about 67%.
Understanding Total LTV and HELOC Ratios
Total LTV (TLTV) includes all your mortgage debt, not just your first mortgage. If you have a second mortgage or home equity line of credit, those amounts get added to your primary loan.
Using the same example above, say you have that $360,000 first mortgage plus a $20,000 home equity loan. Your TLTV becomes 95% ($380,000 total debt divided by $400,000 value).
HELOC Total LTV (HTLTV) counts the full credit line limit, even if you haven't used it all. If you have a $50,000 HELOC but only borrowed $20,000, the lender still counts the full $50,000 when calculating your HTLTV ratio.
Maximum LTV Limits by Property Type
Fannie Mae sets different maximum LTV ratios based on your property type and how you'll use it. Primary residences get the most favorable treatment.
For single-family primary residences, you can borrow up to 95% with automated underwriting approval. Manual underwriting also allows 95% LTV. Two-unit properties max out at 95% with automated approval but drop to 85% with manual underwriting.
Investment properties face stricter limits. Single-family rentals cap at 85% LTV, while 2-4 unit investment properties max out at 75%.
Cash-out refinances get treated more conservatively across all property types. Primary residence single-family homes max out at 80% LTV for cash-out refis, regardless of underwriting method.
The Rounding Rule That Costs Borrowers Money
Fannie Mae rounds all LTV ratios up to the next whole number. This seemingly small detail can cost you thousands in mortgage insurance premiums.
If your calculated LTV is 80.01%, it gets rounded up to 81%. That one basis point pushes you into mortgage insurance territory on a conventional loan. On a $400,000 loan, this could mean paying an extra $100-200 per month in PMI.
The rounding rule applies to all three ratios: LTV, TLTV, and HTLTV. Plan your down payment and loan amounts accordingly. Sometimes adding an extra $1,000 to your down payment can save you thousands in mortgage insurance over the life of your loan.
Required Documentation for LTV Calculations
Your lender needs specific documents to calculate your LTV ratios accurately. For purchase transactions, they'll require your signed purchase contract and the appraisal report.
The appraisal must be completed by a licensed appraiser and include photos of the property, comparable sales, and a detailed analysis of the home's condition and features. Your lender orders this appraisal, typically within a few days of your loan application.
For refinances, you only need the new appraisal. The lender will also pull your current mortgage balance from your loan servicer to calculate how much equity you have.
If you have existing second mortgages or HELOCs, your lender will request payoff statements from those servicers. These statements show exactly how much you owe and any available credit limits.
Why These Rules Exist
Fannie Mae's LTV limits protect both borrowers and the mortgage system from excessive risk. Higher LTV loans default more frequently because borrowers have less equity cushion when property values decline.
The different limits by property type reflect historical loss data. Primary residences have lower default rates than investment properties because owners are more likely to fight to keep their homes. Second homes fall somewhere in between.
Cash-out refinance restrictions exist because borrowers who extract equity often struggle more with payments. Taking cash out reduces your equity buffer and increases your monthly payment simultaneously.
Maximum Loan Amounts for 2026
Fannie Mae sets annual limits on how much you can borrow. For 2026, the baseline conforming loan limit is $832,750 for single-family homes in most areas.
High-cost areas get higher limits. Alaska, Hawaii, Guam, and the U.S. Virgin Islands can go up to $1,249,125 for single-family homes. Specific counties in expensive markets like California and New York also qualify for these higher limits.
Multi-unit properties have progressively higher limits. Two-unit properties max out at $1,066,250 in standard areas, while four-unit properties can go up to $1,601,750.
Common Complications and Gotchas
New construction purchases can combine multiple contracts to determine the purchase price. If you're buying a $350,000 home and adding a $25,000 pool, your purchase price becomes $375,000 for LTV calculation purposes.
Condos in buildings that haven't completed Fannie Mae project approval may face additional LTV restrictions. Some buildings require lower maximum LTV ratios until they meet all project requirements.
Borrowers with previous foreclosures, short sales, or deed-in-lieu transactions face reduced maximum LTV ratios. These restrictions typically last several years and vary based on the type of previous mortgage event.
Properties in declining markets may face additional scrutiny. If your appraisal shows significant value decreases in your neighborhood, your lender might require additional equity or mortgage insurance even at lower LTV ratios.
References
For the official guidelines, see 4203.1: Loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios and maximum loan amounts in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Calculating loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios
(a)
Calculating LTV, TLTV and HTLTV ratios
Ratios are calculated using the total amount of outstanding liens and “value”, as described in this section.
(i)
(A)
For purposes of calculating LTV, TLTV and HTLTV ratios
For purposes of calculating LTV, TLTV and HTLTV ratios, “value” is determined as follows:
“Value” is…
The
lesser
of the appraised value of the Mortgaged Premises as of the appraisal report effective date and the purchase price of the Mortgaged Premises.
Note: For newly constructed homes, multiple contracts may be combined to determine the purchase price (e.g., the purchase contract for the house and a contract to install a swimming pool may be added together to establish the purchase price).
Refinance Mortgages
The appraised value of the Mortgaged Premises as of the appraisal report effective date
Section 4502.5
One-Time Construction to Permanent Mortgages and Renovation Mortgages
Section 4602.2
for One-Time Close transactions
Two-Time Close Construction to Permanent Mortgages and Renovation Mortgages
The appraised value of the Mortgaged Premises, as completed, as of the appraisal report effective date
®
®
®
(B)
For Mortgaged Premises located in the State of New York
Solely for the purpose of determining whether mortgage insurance is required or should be canceled, for Loan Product Advisor
®
and Non-Loan Product Advisor Mortgages, the “value” of the Mortgaged Premises located in the State of New York is the appraised value of the Mortgage Premises on the Note Date. For purchase transaction Cooperative Share Loans, solely for the purpose of determining whether mortgage insurance is required, the sales price of the Cooperative Interest may be used. If mortgage insurance is required, see
Section 4701.5
.
(This definition of the value of the Mortgaged Premises located in the State of New York applies only to the above-stated mortgage insurance requirements and is not applicable for any other purposes under the terms of the Purchase Documents.)
Chapter 4701
for mortgage insurance requirements.
(ii)
Calculation of LTV, TLTV and HTLTV ratios for Loan Product Advisor Mortgages
Loan Product Advisor calculates the LTV, TLTV and HTLTV ratios based on data submitted by the Seller.
Note: For certain Loan Product Advisor Mortgage transactions, Freddie Mac may accept the “value” to be the Seller-provided estimate of value or the purchase price as the basis for the Loan Product Advisor assessment of the Mortgage. Refer to
Section 5602.3
and
5602.4
for more information on automated collateral evaluation (ACE) and ACE+ PDR, respectively.
(iii)
Calculation of LTV, TLTV and HTLTV ratios for Non-Loan Product Advisor Mortgages
Calculation of LTV, TLTV and HTLTV ratios for Non-Loan Product Advisor Mortgages
LTV
Divide the First Lien Mortgage amount by “value” determined as described above.
TLTV
Divide the sum of the First Lien Mortgage amount and the disbursed amount of any secondary financing (including HELOCs) by “value” determined as described above.
HTLTV
Divide the sum of the First Lien Mortgage amount and the total HELOC credit line limit and any other secondary financing by “value” determined as described above.
(b)
(i)
Rounding requirements
To determine whether a Mortgage complies with the maximum LTV, TLTV and HTLTV ratio requirements,
the calculated ratio must be rounded up to the next whole number
. For example, 94.01% must be rounded up to 95%.
At delivery, Freddie Mac will calculate the LTV, TLTV and HTLTV ratios for each Mortgage based on data delivered by the Seller. Each ratio will be calculated to two decimal places, and the result will be rounded up to the next whole number.
(ii)
(b)(iii)
below, the maximum LTV, TLTV and HTLTV ratios are:
Purchase and “no cash-out” refinance Mortgages
(fixed-rate and ARMs)
Maximum LTV/TLTV/HTLTV ratio
Accept Mortgages, excluding super conforming Mortgages
Manually Underwritten Mortgages and super conforming Mortgages
1-unit Primary Residence
95%
95%
2-unit Primary Residence
95%
85%
3- and 4-unit Primary Residences
95%
80%
90%
90%
1-unit Investment Property
85%
85%
2- to 4-unit Investment Property
75%
75%
(fixed-rate and ARMs)
Maximum LTV/TLTV/HTLTV ratio
Accept Mortgages and Manually Underwritten Mortgages; all eligible loan amounts
1-unit Primary Residence
80%
2- to 4-unit Primary Residence
75%
75%
1-unit Investment Property
75%
2- to 4-unit Investment Property
70%
(iii)
LTV, TLTV and HTLTV ratios for certain Mortgages
The maximum LTV, TLTV and HTLTV ratios for the following Mortgages may differ from the maximum ratios identified above; additional information can be found in the following sections:
Maximum LTV, TLTV and HTLTV ratios for certain Mortgages
Section 4502.5
Freddie Mac Enhanced Relief Refinance Mortgages
®
®
®
Section 4605.1
Mortgages secured by a Manufactured Home
Section 5703.8(a)
Mortgages that use a streamlined project review
Section 5701.4
Mortgages to Borrowers with a credit history that includes a previous Mortgage foreclosure, a conveyance of a deed-in-lieu of foreclosure or a short sale
®
(c)
Maximum original loan amounts
The following maximum original loan amounts* apply to Home Mortgages with Funding Dates or Settlement Dates on or after January 1, 2026. Except for the Mortgage offerings and characteristics identified in the table below, the loan amount used to determine compliance with the original loan amount limits is the
original
loan amount:
Number of units
Property in the contiguous 48 States, the District of Columbia or Puerto Rico
Property in Alaska, Guam, Hawaii or U.S. Virgin Islands
1
$832,750
$1,249,125
2
$1,066,250
$1,599,375
3
$1,288,800
$1,933,200
4
$1,601,750
$2,402,625
*Mortgages with higher loan amounts may be eligible for sale if they meet the requirements of
Chapter 4603
.
The following table identifies, for each Mortgage offering or characteristic listed, the loan amount to be used to determine compliance with the original loan amount limits:
Determining compliance with the original loan amount limits
Mortgage offering or characteristic
Loan amount to be used to determine compliance with maximum loan amounts
Seller-Owned Modified Mortgages (as described in
Chapter 4402
and
)
The loan amount of the Mortgage as stated in the original Note
Seller-Owned Converted Mortgages (as described in
Chapter 4402
and
)
The loan amount of the Mortgage as stated in the ARM Note
One-Time Close with automatic conversion Construction to Permanent Mortgages and Renovation Mortgages (as described in
Sections 4602.2(a)
and
6302.28
)
The loan amount of the Mortgage stated in the Note
One-Time Close with modification agreement Construction to Permanent Mortgages and Renovation Mortgages (as described in
Sections 4602.2(c)
and
6302.28
)
The
higher
of:
The loan amount of the Mortgage stated in the Note prior to the modification executed at Interim Construction Financing
or
The loan amount of the Permanent Financing as stated in the Construction to Permanent Modification Agreement
Two-Time Close Construction to Permanent Mortgages and Renovation Mortgages (as described in
Sections 4602.2(c)
and
6302.28
)
The loan amount of the Mortgage as stated in the Note for the Permanent Financing
Mortgages with future advances made before the Delivery Date consolidated with the outstanding principal amount (as described in
)
The loan amount of the Mortgage as stated in the original Note (which must be equal to or greater than the consolidated principal amount)
Mortgages with a principal curtailment made before the Delivery Date (as described in
)
The loan amount of the Mortgage as stated in the Note
Mortgages with financed mortgage insurance premiums (as described in
)
The loan amount of the Mortgage as stated in the Note (which includes the financed mortgage insurance premium)
Note: For the Mortgage offerings and characteristics listed in the table above, the loan amount used to determine compliance with the maximum loan amount limits may be different from the amount delivered in the ULDD Data Point
Note Amount
and from the amount used to calculate the LTV ratio. Refer to
Chapter 6302
for delivery instructions.
