What is LTC, ACV, and LTV for construction loans? When financing a construction project, lenders look at a few key metrics to determine how much they’re willing to lend and how strong a deal is. The most common ones you’ll hear are LTC (Loan-to-Cost), ACV (As-Completed Value), and LTV (Loan-to-Value). Understanding these terms can help you better plan your capital, set expectations, and structure a successful construction loan.
LTC measures the loan amount against the total project cost, including land, construction, soft costs, and contingency. Most construction loans fall in the 60–75% LTC range, which means lenders want borrowers to have meaningful cash equity in the project. ACV, on the other hand, is the appraised value of the property once construction is complete, based on the plans and comparable finished properties. This is the value lenders use to assess the end result of the project.
Finally, LTV compares the loan amount to the as-completed value (ACV). Construction lenders typically target 55–70% LTV to ensure the loan is well protected once the project is finished. In practice, lenders usually size the loan based on whichever ratio—LTC or LTV—is more conservative. If you’re planning a construction project and want to understand how these numbers apply to your specific deal, I’m always happy to walk through it with you.
Types of construction loans
- Construction-Only (Short-Term) Loan
This loan covers only the cost to build the property. It’s typically interest-only during construction (6–18 months). Once the project is complete, the borrower must pay it off or refinance into a permanent mortgage.
Best for: Builders or investors who plan to sell or refinance quickly.
- Construction-to-Permanent (C2P) Loan
This loan combines the construction phase and long-term mortgage into one loan. During construction, the borrower usually pays interest-only on drawn funds. Once construction is complete, the loan automatically converts to a permanent mortgage without a second closing.
Best for: Owner-occupants building a primary or second home.
- Renovation / Rehab Construction Loan
Used to purchase and renovate or improve an existing property. Loan amounts are often based on the after-repair value (ARV). Popular programs include FHA 203(k), Fannie Mae HomeStyle, and private “fix-and-flip” loans.
Best for: Investors or homeowners improving an existing property.
- Owner-Builder Construction Loan
Designed for borrowers who act as their own general contractor. These loans are harder to qualify for and usually require documented construction experience, strong credit, and detailed budgets.
Best for: Experienced builders constructing their own home.
- Spec Construction Loan (Spec Loan)
Used to build a property without a pre-sold buyer, typically for resale. These are short-term, higher-risk loans and often require more equity and experience.
Best for: Professional builders and developers.
- Commercial Construction Loan
Used for income-producing properties such as multifamily, retail, office, industrial, or mixed-use projects. These loans rely heavily on project feasibility, cash flow, and borrower experience.
Best for: Investors and developers building commercial real estate.
- Land + Construction Loan
This loan combines the purchase of the land and the cost to build into one construction loan. Some lenders allow owned land to be used as equity.
Best for: Borrowers who don’t already own the lot.
What do next?
If you’re considering a construction project, getting prepared early can save time, money, and stress. Start by reviewing your credit, organizing financial documents, outlining your project scope and budget, and selecting an experienced builder or contractor with solid documentation. Understanding your equity position, timeline, and exit strategy (sell, refinance, or occupy) is also key to a smooth approval process.
For guidance on next steps and to make sure you’re positioned for success, contact Adam Lawrence at Valor Lending Group to walk through your construction loan options and get expert support from start to finish.
alawrence@valorlending.com or call 858-344-0323
Recap of our Loan Products:
- Hard Money Loans (20% down / minimal documentation) Typically Fund in 7-10 days.
- Stated Income Loans (Great for business owners and self employed ) No tax returns!
- 100% financing is available (we can cross collateralize other properties if there is enough equity)
- Valor VA Home Loan 100% financing up to $1.5MM
- Rental Property Loan – No tax returns or DTI calculation! Based on subject property cash flow – No DSCR Coverage needed!
- Flipper & Rehab Loans (Flip a property with one of our many options)
- 2nd Position Loans up to $5mm
- Raw Land & Lot Loans
- Ground up Construction for spec homes, custom homes and commercial ground up.
- 10% down Jumbo’s with NO MI up to $2mm / 15% down up to $3mm
- Acreage Properties
- Commercial Loans up to $500mm
- 3% & 5% down Conventional Loans– LPMI (Lender paid mortgage insurance)
- Foreign Nationals Loans (no social security or residency required)
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