Selling Guide

Published December 16, 2020

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How is the LTV ratio calculated for single-close construction-to-permanent transactions?

Calculating the LTV Ratio for Single-Closing Construction-to-Permanent Mortgages

Single-closing construction-to-permanent mortgages are subject to the purchase and limited cash-out refinance maximum LTV, CLTV, and HCLTV ratios (based on the property type) provided in the Eligibility Matrix, as applicable.

The LTV ratio calculation differs depending on whether the transaction is a purchase or a limited cash-out refinance, as shown in the table below.

Transaction Type Lot Ownership Requirement LTV Ratio Calculation
Purchase The borrower is not the owner of record of the lot at the time of the first advance of interim construction financing. Divide the loan amount of the construction-to-permanent financing by the lesser of:
  • the purchase price (sum of the cost of construction and the sales price of the lot), or
  • the “as completed” appraised value of the property (the lot and improvements).
The loan amount of a manufactured home can include all allowable costs as listed in B5-2-03, Manufactured Housing Underwriting Requirements
Limited Cash-out Refinance The borrower is the owner of record of the lot at the time of the first advance of interim construction financing. Divide the loan amount of the construction-to-permanent financing by the “as completed” appraised value of the property (the lot and improvements).

For additional information, see B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions.

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