April 3, 2017
What are the minimum FHA loan amounts? A reader asked us a question in the comments section along those lines recently:
“Is there a minimum amount for FHA Loans? Someone told me you have to borrow at least $90,000. Does the loan depend on your annual income?”
FHA mortgages are not approved or denied based on the dollar amount of your annual income, but rather on your ability to afford the loan based on your financial obligations (including an estimate of your monthly mortgage payment) compared to your monthly income. Your debt-to-income ratio is more important in the loan approval equation.
When it comes to FHA loan amounts, the minimum loan is based on the appraised value of the property or the asking price, whichever is lower.
The FHA loan amount is affected by how much down payment you will be required to make (3.5% minimum) plus any approved add-ons to the mortgage loan amount such as approved closing costs, discount points where permitted, or added funds for energy-efficient improvements to the home under the FHA Energy Efficient Mortgage program.
There is no arbitrary dollar amount set as a minimum FHA loan. However, for all new purchase loans, there are regulations that govern how much the FHA can guarantee and there is a restriction on FHA forward mortgages where cash back to the borrower is concerned. FHA loans for new purchases can’t be made for an amount larger than the asking price/appraised value with the intention of giving cash back to the borrower.
Some house hunters are interested in larger loans for this purpose, but under the FHA single family home loan program, no cash back is allowed in nearly all cases except for refunds of money paid up front that was later financed into the loan.
FHA mortgage loans have provisions for high-cost housing markets as well as for low-cost housing markets, so borrowers can expect their FHA loan options to be appropriate for the housing market where their potential new home is located.
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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