August 29, 2014
FHA loan applicants often want to know how much they can borrow with an FHA mortgage. There’s no set answer to that question since the FHA loan amount depends on the appraised value of the home and other factors. Borrowers will need the amount of the sale price of a home before a loan amount can be properly calculated.
Some borrowers want to know if they can apply for more than the sale price of the home with the intent of taking the excess funds for other purposes. This is not permitted for FHA home loans, so borrower who ask “how much can I borrow?” with that idea in mind should know it’s not a possibility.
But the FHA loan basics for maximum loan amounts are spelled out for the lender in the FHA loan rulebook, HUD 4155.1. Chapter One, Section A explains the basics starting with the following:
“FHA’s single family mortgage limits are set by county and are tied to increases in the loan limits established by the Federal Home Loan Mortgage Corporation (Freddie Mac) in accordance with Section 203(b)(2)(A) of the National Housing Act, as amended by 12 U.S.C.17091.
Under Section 203(b), the nationwide basic mortgage limits (the floor) may not
• exceed 150 percent of the Freddie Mac national loan limit, or
• be less than 65 percent of the dollar amount limitation of Freddie Mac.”
As you can see, FHA mortgage limits aren’t the same nationwide. In fact, there are some additional instructions for participating FHA lenders for high-cost housing markets:
“Section 203(b)(2)(A) of the National Housing Act states that mortgage limits in high cost areas (the ceiling) may increase to 150 percent of the dollar amount limitation as described under Section 305(a)(2) of Freddie Mac for a residence of applicable size. In these high cost areas, the loan limit is equal to the lesser of
• 115 percent of the area median house price, or
• the statutory ceiling for the high cost areas.
Section 214 of the NHA provides that mortgage limits for Alaska, Hawaii, Guam, and the Virgin Islands may be adjusted up to 150 percent of the new FHA ceilings.”
Borrowers should discuss their needs with a loan officer and consider getting pre-qualified for a loan to determine what FHA loan limit may be available in a given housing market. FHA loans are limited to the amount remaining (plus any allowable add-ons to the loan amount such as discount points or other costs) after the borrower has made the required 3.5% down payment.
Do you have questions about FHA home loans? Ask us in the comments section.
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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