Education
LTC vs LTV Explained
Loan-to-Cost and Loan-to-Value are the two ratios that determine how much a construction lender will fund. Understanding both is essential to structuring a viable Sacramento construction project.
Loan-to-Cost (LTC)
LTC measures the loan amount against the total project cost — land acquisition (or as-is value if already owned), hard costs, soft costs, interest reserves, and contingency. If your total project cost is $1,000,000 and the lender funds $850,000, your LTC is 85%.
Northern California construction lenders typically allow up to 85–90% LTC. The remaining 10–15% must come from borrower equity — cash, land equity, or a combination.
Loan-to-Value (LTV)
LTV measures the loan against the appraised completion value — what the finished property will be worth based on comparable sales. If the appraiser values the completed property at $1,400,000 and the loan is $1,000,000, LTV is roughly 71%.
Most Sacramento construction lenders cap LTV at up to 75% of completion value. This protects the lender against soft markets and appraisal volatility.
Worked Example: Roseville Spec Home
Land (owned, as-is value): $250,000
Hard costs: $600,000
Soft costs + contingency + interest reserve: $90,000
Total project cost: $940,000
Appraised completion value: $1,300,000
Max loan at 85% LTC = $799,000
Max loan at 75% LTV = $975,000
Approved loan = lesser of the two = $799,000
Lenders almost always size to the lesser of LTC and LTV. Strong completion value alone will not unlock additional proceeds if your project cost is modest, and vice versa.
For a deeper walkthrough of the full qualification picture, see our construction loan requirements and down payment requirements.
Frequently Asked Questions
Which ratio is more important — LTC or LTV?+
Most construction lenders size the loan to the lesser of the two. A strong appraisal/completion value (LTV) can support a larger loan, but the LTC ceiling still limits how much of the actual budget the lender will fund.
What LTC and LTV can I expect in Sacramento?+
Typical caps we see across Sacramento, Roseville, Folsom, and Stockton-area projects: up to 85–90% LTC and up to 75% LTV. Stronger borrowers with verified liquidity and experience tend to receive the higher end.
Does land equity count toward my equity contribution?+
Often yes. If you already own the parcel and it has appreciated, the as-is land value can contribute toward the equity requirement — subject to the lender's appraisal and seasoning rules.
Why did the lender's appraisal come in below my projection?+
Appraisers rely on recent comparable sales in the immediate submarket. Aggressive completion-value assumptions, unique designs, or thin comp sets can compress LTV. We help borrowers stress-test budgets and exit values before submission.
Want Us to Stress-Test Your Numbers?
Send your project budget and completion value — we'll model LTC and LTV against lenders in our network.
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