FHA loan rules in HUD 4155.1 do spell out an FHA loan limit, which is known as the “floor” on the bottom end, and the “ceiling” at the top end of the range. The FHA recently issued a mortgagee letter (HUDNo.2015-25) which updates the information for FHA loan limits in general and announces a new FHA loan rulebook to be issued soon, titled FHA Single Family Housing Policy Handbook 4000.1.
The mortgagee letter states:
“The minimum FHA national loan limit ‘floor’ is at 65 percent of the national conforming loan limit (which is $417,000 for a one unit property for the period January 1, 2015 through December 31, 2015). The floor applies to those areas where 115 percent of the median home price is less than 65 percent of the national conforming loan limit.”
FHA home loan amounts are determined in part by the asking price of the home or the appraised value of the property, whichever is lower. So the final amount of an FHA loan would be determined after the appraisal, including any allowed addons to the loan such as an FHA Energy Efficient Mortgage package or certain permitted expenses.
Borrowers should know that the FHA loan amount is calculated assuming the minimum down payment required (3.5%) has been paid. The borrower cannot finance the down payment, it must be paid at closing time in cash from borrower funds that have been approved by the lender. The source of your down payment funds is reviewed carefully because FHA loan rules don’t allow down payment funds to come from unsecured loans, credit card advances, etc.
Speak to a loan officer if you need assistance determining the amount of a home loan based on the type of property you wish to purchase.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section. All comments are reviewed before they appear on the site.