July 12, 2012
FHA home loans require a minimum down payment. The amount of an individual borrower’s down payment varies for several reasons.
One reason is that the borrower must pay a percentage of the overall loan amount. Rather than requiring X amount of dollars as a standardized down payment, the borrower pays this percentage based on how much financing he or she qualifies for.
For “new purchase” FHA home loans, the FHA has set a maximum Loan-To-Value ratio of 96.5%. “Loan-To-Value” simply means the amount of the FHA guaranteed home loan compared to the value of the home. 96.5%, being the maximum FHA loan available for a new purchase, means the FHA requires a 3.5% down payment of the loan amount.
From the FHA loan rules found in HUD 4155.1 Chapter Two:
“The maximum mortgage amount that FHA will insure on a purchase is calculated by multiplying the appropriate loan-to-value (LTV) factor by the lesser of the property
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.
Browse by Date: