December 3, 2015
HUD 4000.1 was published earlier in 2015, and contains new, updated, and restated FHA loan policy on single-family mortgages, refinance loans, HECM loans and more.
One important section of the new FHA home loan rules for single family mortgages is the part of HUD 4000.1 that discusses maximum mortgage loan amounts. Do you know what the rules are for calculating the maximum loan amount on a new purchase FHA loan?
According to HUD 4000.1, “The maximum mortgage amount that FHA will insure on a specific purchase is calculated by multiplying the appropriate LTV percentage by the Adjusted Value. In order for FHA to insure this maximum mortgage amount, the Borrower must make a Minimum Required Investment (MRI) of at least 3.5 percent of the Adjusted Value.”
But there may be situations where the lender is permitted to add additional funds to the mortgage loan amount for repairs and improvement. HUD 4000.1 says:
“A Mortgagee may add repair costs to the sales price before calculating the mortgage amount if:
–the repairs are required by the Appraiser to meet HUDs MPR;
–the repairs are paid for by the Borrower; and
–the sales contract or addendum identifies the Borrower as the party responsible for payment and completion of the repairs.”
How does the lender calculate the maximum dollar amount permitted for repair costs? HUD 4000.1 instructs:
“The maximum amount of repair costs that may be added to the sales price is the lesser of:
–the amount by which the value of the Property exceeds the sales price;
–the Appraisers estimate of repairs; or
–the amount of the contractors bid.”
The lender is permitted to add weatherization expenses to the loan, also:
“A Mortgagee may add energy-related weatherization costs, to be paid for by the Borrower, in accordance with (FHA) Weatherization policies.”
Talk to your loan officer to learn more about adding such costs as lender policies, state law, and other requirements may also factor in.
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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