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If you need an FHA forward mortgage, refinance loan, or FHA rehab loan , you should definitely know how home loans work in this area. FHA mortgages require the lender to set the mortgage amount based on the lesser of the appraised value of the home or the seller’s asking price.

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Do FHA Mortgage Loans Have Minimum Amounts?

November 18, 2018 - If you need an FHA forward mortgage, refinance loan, or FHA rehab loan for a fixer-upper home, you should definitely know how home loans work in this area.

FHA Mortgage Amounts: The Rules You Should Know

FHA mortgages require the lender to set the mortgage amount based on the lesser of the appraised value of the home or the seller’s asking price.

That means that the loan amount will be contingent in part on the appraisal and borrowers should expect this to be a factor in determining how much the loan will ultimately be. FHA loans are designed to allow certain closing costs to be financed, which can definitely change the loan amount.

FHA loans are also built to allow the seller to pay certain closing costs up to an FHA-defined limit, and borrowers can also search for local down payment assistance programs to help get into a mortgage loan with less money spent out-of-pocket.

Remember, the bigger your down payment, the lower your principal loan amount will be (without factoring in any financed closing costs) and if you choose to get down payment assistance you can use your own funds to pay other expenses of the loan.

FHA Loan Minimums and Maximums

The amount of your FHA loan will depend in part on the nature of the property you wish to buy. A mobile home, for example, may be more cost-effective than applying for an FHA One-Time Close construction loan or some kinds of forward mortgages for more expensive homes; some borrowers opt for the purchase of a mobile home for this reason.

The FHA loan amount in such cases will be adjusted accordingly-the cost of the home or the appraised value of the property again being a major factor. You won’t be required to borrower more than you need to purchase the home.

This also means you cannot apply for a loan that is larger than what is needed (to buy and include any permitted closing costs in the mortgage amount) and take the excess funds in cash. Borrowers are not permitted to get cash back in this way on an FHA mortgage loan transaction.

FHA loan minimums don’t really exist-there are no tables in the FHA Single Family Home Loan Handbook (HUD 4000.1) that show how much or how little you are permitted to borrow aside from the FHA mortgage guaranty limits established by county every year by the FHA and HUD; those limits pertain to what the FHA is willing to guarantee for the loan.

Talk to your loan officer if you are unsure about how FHA loan rules in this area affect your ability to buy the home you are looking for.

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