FHA Home Loans - What's the Maximum You Can Borrow?

June 23, 2019

FHA home loan rules establish guidelines for maximum loan amounts for FHA new purchase real estate loans as well as for FHA refinance loans. What follows is a discussion of these guidelines, but first-time home buyers should know that FHA loan guaranty limits vary depending on the county. There are low-cost real estate markets and high-cost markets as well as housing markets that are simply average. FHA loan guaranty limits for these areas vary based on a variety of factors.

FHA Home Loan Maximum Mortgage Guidelines: The Basics

The rules that govern FHA maximum mortgage amounts are found in HUD 4000,1, the FHA Single-Family Mortgage handbook.

Any home loan that is backed by the FHA is required to stay within the limits; HUD 4000.1 instructs the lender, “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.”

Maximum loan-to-value ratios for FHA mortgages will vary based on a variety of factors. Your FICO scores may dictate part of this, the type of loan or the circumstances under which you apply for the loan (with or without a non-occupying co-borrower, for instance) can all affect the LTV.

Your maximum loan amount can be affected by the type of loan (a new purchase mortgage or a refinance loan) and even the stage of construction the home is under. HUD 4000.1  says that under most FHA loan programs, “the maximum Mortgage is the lesser of the Nationwide Mortgage Limit for the area, or a percentage of the Adjusted Value”.

FHA Loan Rules for Determining the Adjusted Value of the Property

HUD 4000.1 says the adjusted value is calculated differently depending on whether you buy a home or refinance it. FHA loans to purchase a home will have an adjusted value that is either the purchase price (minus any inducements to purchase where applicable); or the appraised value of the property.

FHA refinance loans calculate the value differently depending on when the real estate was purchased:                        

• For refinance loans applied within 12 months of the original case number assignment date, the Adjusted Value is the lesser of the purchase price plus any improvements that have been made as long as those improvements are properly documented, or by the property value.
• Homes that were purchased more than 12 months prior to the case number assignment date will have the property value used as the adjusted value; for homes that are inherited, the rules for owning the home for 12 months or more will apply.

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