Conventional Mortgage LTV Limits: Purchase, Refinance, and PMI

Fannie Mae’s loan-to-value limits set the maximum share of a home’s value you can finance, which is what actually determines your minimum down payment. For a one-unit primary residence on a fixed-rate loan, the Fannie Mae LTV limit tops out at 97% when at least one borrower is a first-time homebuyer, meaning 3% down is enough. Adjustable-rate loans on the same property cap at 95%. From there the ceilings step down by property type, occupancy, and whether you’re purchasing, refinancing, or pulling cash out. All of these limits sit inside the 2026 baseline conforming loan limit of $832,750 for a one-unit property, rising to $1,249,125 in high-cost areas.¹

Primary Residence Limits

A one-unit home you plan to live in gets the most leverage Fannie Mae offers. Fixed-rate financing reaches 97% LTV; adjustable-rate financing stops at 95%.²

There are two ways to reach 97%. The first is a standard purchase where at least one borrower has not owned a residential property in the past three years. The second is HomeReady, which drops the first-time buyer rule but limits eligibility to borrowers earning no more than 80% of the area median income. Either path requires a fixed-rate loan on a one-unit principal residence, approval through Fannie Mae’s Desktop Underwriter, and (when all occupying borrowers are first-time buyers) homeownership education from a qualified provider before closing. High-balance loans, standard manufactured homes, and ARMs are excluded from 97% financing.³

Down payment sources at 97% are flexible. Gifts, grants, employer-assisted housing programs, and community assistance all qualify, and there is no minimum borrower contribution from your own funds on a one-unit purchase.⁴

Two- to Four-Unit Primary Residences

Buying a duplex, triplex, or fourplex you plan to occupy gives you more leverage than most borrowers expect. Loans approved through Desktop Underwriter at standard conforming amounts reach 95% LTV, so 5% down can be enough on a fourplex you will live in.²

Two situations tighten that. High-balance loans on multi-unit primary homes drop to 85% (two units) and 75% (three to four units). Manually underwritten loans face the same tighter caps and require minimum credit scores of 700 or higher when LTV exceeds 75%. Manually underwritten three- and four-unit purchases also require six to twelve months of reserves depending on your debt-to-income ratio.²

Second Homes and Investment Properties

Properties you will not occupy carry tighter caps because borrowers under pressure tend to protect their primary residence first.

Second home, one unit: 90% LTV maximum (10% down). The property must be suitable for year-round use and cannot be a timeshare or subject to a rental pool agreement.
Investment property, one unit: 85% LTV (15% down).
Investment property, two to four units: 75% LTV (25% down).

These caps apply to both fixed-rate and adjustable-rate mortgages, and investment property borrowers face steeper reserve requirements that scale with the number of financed properties they hold.²

Refinance Limits

Refinance caps depend heavily on whether you are pulling cash out or simply replacing your existing loan.

Limited Cash-Out (Rate-and-Term)

A limited cash-out refinance pays off your current mortgage and rolls in closing costs without extracting meaningful equity. Through Desktop Underwriter, the ceilings track purchase limits fairly closely:

One-unit primary residence: 97% if the existing loan is owned by Fannie Mae, otherwise 95%.
Two- to four-unit primary residence: 95% at standard conforming amounts.
Second home: 90%.
One-unit investment property: 85%.
Two- to four-unit investment property: 75%.

Cash-Out

Cash-out caps are substantially lower across every property type:

One-unit primary residence: 80%.
Two- to four-unit primary residence: 75%.
Second home: 75%.
One-unit investment property: 75%.
Two- to four-unit investment property: 70%.

Cash-out refinances also carry seasoning rules. At least one borrower must have been on the property title for six months before the new loan disburses, and any first mortgage being paid off must have been in place for at least twelve months. Inherited properties and those obtained through divorce settlements are exceptions.⁵

What Fannie Mae Divides Into the Loan Amount

The value used in the LTV calculation is not always the number you expect. On purchases, Fannie Mae uses the lower of the appraised value or the purchase price.⁶ A generous appraisal will not shrink your down payment below the price you agreed to. On refinances, the current appraised value stands on its own.

Some loans skip the traditional appraisal entirely through “value acceptance,” where the automated system validates the value from internal data. Eligible transactions include one-unit principal residences, second homes, and investment property refinances with an estimated value under $1,000,000. Multi-unit properties, co-ops, manufactured homes, and construction loans are not eligible. A value acceptance offer expires four months from the date issued.⁷

When a Second Lien Is in the Picture

If a second mortgage or home equity line sits behind the first, Fannie Mae also looks at combined loan-to-value (CLTV). CLTV adds the first mortgage balance to any subordinate lien balances and divides by the property value. A $300,000 first plus a $50,000 second on a $400,000 home is a CLTV of 87.5%.

High combined loan-to-value (HCLTV) applies when the subordinate lien is a HELOC. Instead of the drawn balance, HCLTV uses the full credit limit, because you could draw the whole line at any time. A $50,000 HELOC with a zero balance still counts as $50,000. Fannie Mae publishes maximum CLTV and HCLTV figures alongside the primary LTV caps in the eligibility matrix, and exceeding either can disqualify a loan even when the first mortgage’s LTV is within range. One exception: when the subordinate lien is a Community Seconds loan, CLTV can stretch up to 105%.²

The 80% PMI Line

Any conventional loan with an LTV above 80% requires private mortgage insurance. This is not a Fannie Mae policy preference; it is written into the congressional charters of Fannie Mae and Freddie Mac, which require credit enhancement on loans exceeding 80% LTV.⁸

PMI is not permanent. Under the Homeowners Protection Act, you can request cancellation once your scheduled loan balance reaches 80% of the property’s original value, or once actual payments bring it there, as long as you are current and can show the property has not lost value. If you never request cancellation, PMI terminates automatically at 78% of the original value on the scheduled amortization.⁹ Both thresholds are pegged to original value, not current market value. Extra principal payments can get you to the 80% request point sooner, but the automatic 78% trigger follows the original schedule regardless.

Credit Score and Reserve Floors That Rise With LTV

Higher LTV brings tighter underwriting. Desktop Underwriter sets minimum credit scores based on the full risk profile of the file, but manually underwritten loans have hard floors in the eligibility matrix:

One-unit purchase or rate-and-term refinance above 75% LTV: minimum 680 with DTI at or below 36%, or 720 with DTI up to 45%.
Two-unit purchase above 75% LTV: minimum 700 (DTI ≤ 36%) or 720 (DTI ≤ 45%), with six months of reserves.
Three- to four-unit purchase: minimum 700 (DTI ≤ 36%) or 720 (DTI ≤ 45%), with six to twelve months of reserves depending on DTI.

At 75% LTV or below, score requirements loosen considerably, dropping to 640 for a one-unit property with a DTI under 36%. A larger down payment translates directly into more underwriting room: a borrower with a 660 score and 25% down may clear a file that would be rejected outright at 5% down. Reserve requirements move the same way. One-unit purchases run through automated underwriting often require no reserves; multi-unit and investment property loans routinely demand months of documented liquid assets.

High-Balance Loans

Every cap above assumes the loan sits within the 2026 baseline conforming limit of $832,750 for a one-unit property. Loans above that baseline but below the high-cost ceiling of $1,249,125 are high-balance, and they carry tighter LTV restrictions on certain property types.¹

Multi-unit buyers feel the biggest change. A high-balance loan on a two-unit primary residence drops from 95% to 85%, and three- to four-unit properties fall to 75%. High-balance loans are also shut out of 97% LTV financing entirely, regardless of first-time buyer status.² In an expensive market, check whether your loan amount crosses into high-balance territory before you settle on a down payment plan; it can be the difference between 5% down and 15% down on a duplex.

1
Federal Housing Finance Agency. FHFA Announces Conforming Loan Limit Values for 2026
2
Fannie Mae. Eligibility Matrix
3
Fannie Mae. FAQs: 97% LTV Options
4
Federal Deposit Insurance Corporation. Fannie Mae Standard 97 Percent Loan-to-Value Mortgage
5
Fannie Mae. Cash-Out Refinance Transactions
6
Fannie Mae. Loan-to-Value LTV Ratios
7
Fannie Mae. Value Acceptance
8
Federal Housing Finance Agency. Private Mortgage Insurer Eligibility Requirements
9
Office of the Law Revision Counsel. 12 USC 4901 – Definitions