May 28, 2020

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HUD 4000.1 On Calculating Maximum Mortgage Amounts For Purchase Loans

076HUD 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 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:

Joe Wallace - Staff Writer

By Joe Wallace

December 3, 2015

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 for (8) years and is currently the Associate Editor for

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About 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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