October 26, 2021

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FHA Loan Limits: A Reader Question

097A reader asks, “I only want about 40,000. What kind of credit score would I need? Thanks so much.”

In many cases borrowers will typically find that lenders require average credit scores of around 620 or so (or better), but no two lenders operate exactly the same–you may find higher or lower FICO score requirements depending on the lender, the type of home loan, etc.

This reader question seems to imply that the borrower wants to get a loan for a specific amount, but it’s important to understand how FHA loan amounts are determined. The FHA loan amount is set based on the sale price or the property, or the appraised value–whichever is lower. The loan amount can also be affected by adding things to the loan such as an FHA Energy Efficient Mortgage, including permitted fees and expenses into the loan, etc.

So the borrower doesn’t apply for “X” amount of dollars on the loan, rather, the amount is determined by the factors mentioned above. The FHA loan program does not permit borrowers to apply for zero down payment loans–a cash investment by the borrower is required.

Additionally, the FHA does not allow loans for higher amounts than required to complete the transaction with the idea that the borrower can get money back on the deal. FHA loan rules are specifically designed to prevent this from happening.

Do you have questions about FHA loans? Ask us in the comments section. All comments and questions are held for moderation.


Joe Wallace - Staff Writer

By Joe Wallace

December 19, 2014

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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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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