August 1, 2023
It’s a simple question. How much can you borrow using an FHA mortgage? The answer to that question isn’t as simple as some would like.
Why? Because the amount you are allowed to borrow is informed in part by FHA loan limits for the area you want to buy the home in, by the appraised value of the home, and by how much of a down payment you may be required to make.
FHA Loan Amounts And Cash Back At Closing Time
It’s necessary to dispel some new house hunters’ illusions about home loan limits. When you buy a house with an FHA mortgage, you aren’t allowed cash back at closing time except for refunds.
If you are approved for a loan amount, and the actual amount of money needed to buy the home is lower than that your loan is simply reduced to the proper dollar amount.
Don’t expect cash back at closing time instead, this won’t happen.
FHA Loan Limits Are Established By County
Each year the FHA and HUD run the numbers on housing markets across the country and publish brand new FHA loan limits by county for the new calendar year.
HUD.gov published the limits for 2023 late last year noting the “floor” for FHA loan limits and the “ceiling” for them in high-cost areas:
- For calendar year 2023, the FHA nationwide forward mortgage limit “floor” is $472,030 for a single-unit home.
- For calendar year 2023, the “ceiling” for a single-unit home is $1,089,300.
- The maximum amount you can borrow may depend on the property’s number of living units.
A non-conforming FHA loan, also known as an FHA jumbo loan, may exceed these limits. Such loans are possible but your lender may have higher credit score requirements for these larger mortgages.
FHA Loan Limits And The Appraised Value Of The Home
If the home gets an appraised value that is lower than that limit, the appraised value will be used to determine the loan amount, not the maximum loan amount for that county.
The final loan amount may be based on more than the appraised value. Your loan could include approved add-ons like financed closing costs, and FHA up-front mortgage insurance fees.
FHA Loans For Down Payment?
Some want to know if they are allowed to apply for an FHA loan that includes financing for a down payment.
You cannot borrow money under the FHA loan program to make your down payment. FHA loan rules in HUD 4000.1 say each borrower must provide a “minimum cash investment” of either 3.5% or 10% down, depending on FICO scores.
This down payment is permitted to be sourced from family or friends, but you can’t apply for an FHA loan to get down payment money. You also cannot be given down payment help from any third party with a financial stake in the outcome of the loan.
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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