What Are the FHA Loan Limits and Can You Qualify?

It is important to our team here at LoanLeaders of America to connect borrowers to the best programs that work for them and help them achieve their financial goals. We only work with approved FHA lenders who are able to offer not only competitive competitive interest rates, but low loan costs and underwriting standards. These terms can vary in the industry even for the same loan, so we take the initiative to minimize the guesswork to help our clients make more confident financial decisions.

If you have any questions or you’re ready for a consultation, please contact a member of our professional FHA loan team. We can help you quickly identify if you meet the loan requirements for an FHA loan and prepare you for the application process to ensure that you’ll have the proper documentation at the ready. Connect with us today by calling (888) 834-1988!

EXPANDING HOME OWNERSHIP THROUGH FHA LOANS

Many first-time home buyers are able to utilize FHA loans when purchasing their properties because they allow buyers to qualify with less than perfect credit scores and lower down payment requirements. Others utilize the flexibility of FHA loans when they are planning repairs for their new property and need to set cash aside for the required improvements.

To qualify for an FHA loan, there are requirements that must be met by both the borrower and the property the buyer chooses. An FHA-approved appraiser is required to conduct an appraisal of the home to ensure that it meets the minimum standards of condition.

Reduced Down Payment and Flexible Funds Sourcing

One way an FHA loan can help expand home ownership is by providing borrowers with flexibility regarding their down payment. While it is common for loans to require up to 20% down, and FHA loan allows borrowers to pay as little as 3.5% down. 

Along with a lower down payment, FHA loans permit the use of cash gifts from family members and funds obtained via grant from state or local home buyer’s assistance programs. While other types of loans require that the source of funds used for a down payment be exclusively verified, FHA loans do not.

Closing Costs

When you’re approaching closing, there are a few key costs to keep in mind. The seller may choose to cover these costs, but since that is at their discretion, it is best to note the costs regardless. Closing costs can include an appraisal, a credit report, and title expenses. The lender can also choose to cover these costs in the total of the loan amount; however, and higher interest rate may apply.

Mortgage Insurance

More often than not, an FHA loan will require the borrower to obtain mortgage insurance. While this can seem like a large additional extra cost, mortgage insurance can be broken down into two parts. First, the borrower will pay an upfront premium; typically, this cost will be included in the initial loan. Second, the borrower will pay an annual premium that is broken down into much more manageable monthly installments. The annual/monthly payment amount will depend largely on the total amount of the loan along with the years financed. If you are a borrower that has the ability to make a larger down payment, this can usually help reduce or avoid these additional mortgage insurance fees because the borrower has taken the liberty of assuming more of the loan’s risk.

Home Purchase With Planned Improvements Via FHA 203(k) Loans

There are two types of FHA loans designed to encourage the purchasing and refurbishing of older properties in need of some good love and care. These loans allow borrowers to set aside a portion of the loan that they can specifically use for structural and non-structural repairs depending on the type of loan acquired and the home’s needs. 

Buyers can use a standard 203(k) loan for home in need of structural refurbishment and improvements. These costs can include new roofing, additional rooms, plumbing or electrical repairs, deck improvements, and adding a garage to the home. ‘Luxury’ improvements, such as adding a pool, are excluded.

The maximum amount under a standard 203(k) FHA loan is determined by the lesser of two values:

  1. Appraised value of the home plus the total cost of repairs
  2. 110 percent of the estimated value after the repairs/renovations are complete.

A streamlined 203(k) loan is available and can be used to cover other essential, but non-structural, upgrades.  These improvements can include items such as a new coat of paint, new flooring, or upgraded appliances. A streamlined 203(k) loan gives borrowers access to an additional $35,000 above the purchase price of the home that they can use for their renovations.

Properties that qualify for a 203(k) loan include:

  • A single-to-four-family home that has been completed for at least a year
  • A home that has been torn down (some or all of preexisting foundation must remain)
  • A home that you wish to move to a new location
  • Condos may be eligible, but not co-ops.

LoanLeaders of America has been successfully securing FHA financing for our clients for over two decades.

For more information about applying for an FHA loan, speak to one of our experienced team professionals! You can reach a member of our team by calling (888) 834-1988.

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