On an interim construction loan with the purchase of the lot at the same time, do we use LTV or LTC? We have been using the lesser of the 2 but now the loan officer is asking if he has to do that or if he can decide which he wants to use. Below is his email to me

Can you get me the fdic guidline that deals with LTV vs LTC and which I can loan against on interims? Banks are loaning on the LTV instead of the LTC in some cases and I thought it had to be the lessor of the two in a situation where the land was being purchased.

Well, you might want to visit with your EIC to get their take, but the guidelines say:

The supervisory loan-to-value limits should be applied to the underlying property that collateralizes the loan. For loans that fund multiple phases of the same real estate project (e.g., a loan for both land development and construction of an office building), the appropriate loan-to-value limit is the limit applicable to the final phase of the project funded by the loan; however, loan disbursements should not exceed actual development or construction outlays.

So in your case, the purchase of raw land is 65% and if you are referring to 1-4 construction that is 85%.

Then you have:

Value means an opinion or estimate, set forth in an appraisal or evaluation, whichever may be appropriate, of the market value of real property, prepared in accordance with the agency's appraisal regulations and guidance. For loans to purchase an existing property, the term ``value'' means the lesser of the actual acquisition cost or the estimate of value.

This is not the purchase of existing property, so I am not too sure where the acquisition cost would be factored in. You still should not be disbursing more than construction costs at anytime.