December 4, 2012
Borrowers new to the FHA loan program naturally want to know how much they may be permitted to borrow with an FHA guaranteed mortgage loan. While there is no single, fixed dollar amount maximum for the FHA loan program in general, there are rules and guidelines that govern how much a qualified borrower can get.
The FHA loan rules are described in a publication called HUD 4155.1, which includes the following in FHA loan limits:
“The statutory provisions of the National Housing Act establish the maximum loan limits and mortgage amounts for all FHA mortgage insurance programs. Maximum loan limits vary depending upon the
• specific program under which a loan is insured
• number of dwelling units in the property (one to four units), and
• geographic location of the property.
Under most programs, the maximum insurable mortgage is the lesser of
- the statutory loan limit for the area, or
- a percentage of the lesser of the appraised value, or sales price.
The FHA rules for single family FHA mortgages state, “FHA’s single family mortgage limits are set by county and are tied to increases in the loan limits established by the Federal Home Loan Mortgage Corporation (Freddie Mac) in accordance with Section 203(b)(2)(A) of the National Housing Act, as amended by 12 U.S.C.17091. Under Section 203(b), the nationwide basic mortgage limits (the floor) may not
• exceed 150 percent of the Freddie Mac national loan limit, or
• be less than 65 percent of the dollar amount limitation of Freddie Mac.”
Some housing markets are more expensive than others, and this factor is taken into consideration when calculating FHA loan limits for a given area. According to HUD 4155.1, “Section 203(b)(2)(A) of the National Housing Act states that mortgage limits in high cost areas (the ceiling) may increase to 150 percent of the dollar amount limitation as described under Section 305(a)(2) of Freddie Mac for a residence of applicable size. In these high cost areas, the loan limit is equal to the lesser of
• 115 percent of the area median house price, or
• the statutory ceiling for the high cost areas.
Section 214 of the NHA provides that mortgage limits for Alaska, Hawaii, Guam, and the Virgin Islands may be adjusted up to 150 percent of the new FHA ceilings.”
For more information on FHA loan limits, speak to a loan officer or view the FHA loan limits page at https://entp.hud.gov/idapp/html/hicostlook.cfm.
Do you have questions about how FHA loans work? Ask us in the comments section.
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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