October 28, 2011
FHA loan applicants naturally want to know how much mortgage they are qualified to get–how much can an FHA borrower receive on an FHA insured home loan?
The answer isn’t as simple as a fixed dollar amount. There are many things that factor in to the final FHA home loan amount and not all of them are connected to the sale price of the home. Your FHA loan amount is influenced by the current state of the housing market, the interest rate on the loan, the asking price on the property and the fair market value of the home.
The first and most obvious factor that can affect an FHA home loan amount is the borrower’s qualifications. How much are you qualified to borrow based on your income and debt load? Pre-qualifying for an FHA home loan is a very good idea–you’ll get an estimate of what you’re able to afford and can shop for a property within your price range.
Another factor is the asking price of the home. The seller’s price is not the final word, of course, the borrower and the seller must negotiate a final price. Those negotiations are not truly complete until the borrower knows what the FHA appraiser says the home is worth; the fair market value of the property. Once the FHA appraisal is finished and the value of the property is determined, buyer and seller may need to go back to the bargaining table if the price is higher than the value of the home.
The reason for this is because the FHA won’t insure a loan for more than the fair market value, regardless of the selling price. The borrower may choose to pay the difference out of pocket, or try to get the seller to discuss his or her price once more.
FHA loans are also affected by the by-county loan limits established for each housing market, and the FHA loan amount is also influenced by what the borrower includes in the loan amount. You may be able to include some closing costs into the home loan, which will affect the final amount. Another factor that influences FHA loan amounts is the number of units in the property.
Your loan limit may be higher for a multi-unit property than for a condo or single unit home. There are many things that influence the final loan amount. Ask your loan officer for more information on factors that might be unique to your situation or housing market.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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