January 29, 2016
We’ve gotten some questions recently about FHA mortgage loan amounts, so it seemed like a good time to post the FHA loan rules found in HUD 4000.1 about how maximum loan amounts are calculated.
There are FHA loan guaranty limits and FHA mortgage loan amounts–the two shouldn’t be confused as FHA mortgage loan guaranty limits refer to the amount of money the FHA will guarantee for the loan, whereas the maximum loan amount is the highest amount for a specific transaction that the lender/FHA loan rules will allow. FHA loan rules say the maximum can be affected by the type of transaction.
You can find the FHA maximum guaranty amounts for your housing market at the FHA official site: https://entp.hud.gov/idapp/html/hicostlook.cfm.
HUD 4000.1 says of maximum loan amounts:
“A Mortgage that is to be insured by FHA cannot exceed the Nationwide Mortgage Limits, the nationwide area mortgage limit, or the maximum Loan-to-Value (LTV) ratio. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction. Under most programs, the maximum Mortgage is the lesser of the Nationwide Mortgage Limit for the area, or a percentage of the Adjusted Value.”
For new purchase loans the adjusted value is defined by the lesser amount of:
–purchase price less any inducements to purchase; or
–the Property Value.
For refinance loans the adjusted value is the lesser amount of the following based on the nature of the transaction:
For Properties acquired by the Borrower within 12 months of the case number assignment date, the Adjusted Value is the lesser of:
–the Borrowers purchase price, plus any documented improvements made subsequent to the purchase; or
–the Property Value.
Properties acquired by the Borrower within 12 months of case number assignment by inheritance or through a gift from a Family Member may utilize the calculation of Adjusted Value for properties purchased 12 months or greater.
For properties acquired by the Borrower greater than or equal to 12 months prior to the case number assignment date, the Adjusted Value is the Property Value.
These loan amounts can be affected by add-ons to the loan such as the FHA Energy Efficient Mortgage, financing of discount points, etc.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
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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