What are the FHA loan rules for maximum loan amounts? It’s an important question many borrowers need to know when looking for homes; knowing how much you can borrow is an important factor in budgeting and planning for your FHA loan.
FHA Loan Maximum Mortgage Amounts Defined
HUD 4000.1, the FHA loan handbook, describes FHA loan maximum mortgage amounts as follows:
“A Mortgage that is to be insured by FHA cannot exceed the Nationwide Mortgage Limits, the nationwide area mortgage limit, or the maximum Loan-to-Value (LTV) ratio. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction.”
For most FHA loans, the maximum mortgage an applicant is eligible for involves “the lesser of the Nationwide Mortgage Limit for the area, or a percentage of the Adjusted Value.”
The calculations for this adjusted value depend on the nature of your transaction.
Adjusted Value For New Purchase Loans
According to HUD 4000.1, “For purchase transactions, the Adjusted Value is the lesser of (the) purchase price less any inducements to purchase; or the Property Value.”
Adjusted Value For FHA Refinance Loans
HUD 4000.1 states that for FHA refinance loans, the adjusted value of the home may be affected by the way the borrower acquired the property. “For Properties acquired by the Borrower within 12 months of the case number assignment date, the Adjusted Value is the lesser of the Borrower’s purchase price, plus any documented improvements made subsequent to the purchase; or the Property Value.”
For a home the borrower took possession of within 12 months of the FHA loan case number assignment, “by inheritance or through a gift from a Family Member” the lender is allowed to use “the calculation of Adjusted Value for properties purchased 12 months or greater”.
Furthermore, “For properties acquired by the Borrower greater than or equal to 12 months prior to the case number assignment date, the Adjusted Value is the Property Value”.
How FHA Loan Limits Are Calculated
HUD 4000.1 states that your FHA loan limits is calculated “based on the median house prices in accordance with the statute”, the statute being the The National Housing Act, which “establishes the maximum Mortgage limits and the mortgage amounts for all FHA mortgage insurance programs”.
FHA Single Family mortgage limits will vary by county, and are usually updated yearly. There’s a “median” limit, but there are plenty of areas that are considered low-cost or high-cost areas. HUD 4000.1 says, “These limits will be set at or between the low cost area and high cost area limits based on the median house prices for the area.”
Where Can I See The Maximum FHA Loan Limits For Each State and County
If you’re looking for the 2017 maximum FHA Loan LImits for a specific county, our friends at FHA.com have made it easy for you. Simply go to https://www.fha.com/lending_limits.