FHA Limits by FHA.com
What does FHA have for you?
Buying your first home?
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.
Want a fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs - all in one loan.
Financial help for seniors
Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer "yes" to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.
Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.
How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile homes and factory-built housing. We have two loan products � one for those who own the land that the home is on and another for mobile homes that are - or will be - located in mobile home parks..
Need help with your downpayment? State and local governments offer programs that can help. Find a program near you.
Before you start the FHA loan process, be prepared to provide some information to your loan officer. Have it ready now to save time later.
- Address to your place of residence (past two years)
- Social Security numbers
- Names and location of your employers (past two years)
- Gross monthly salary at your current job(s)
- Pertinent information for all checking and savings accounts
- Pertinent information for all open loans
- Complete information for other real estate you own
- Approximate value of all personal property
- Certificate of Eligibility and DD-214 (for veterans only)
- Current check stubs and your W-2 forms (past two years)
- Personal tax returns (past two years), current income statement and business balance sheet for self-employed individuals
FHA Requirements: Mortgage Insurance
Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.
New FHA Annual Mortgage Insurance Premium
President Obama signed a bill in August of 2010 giving HUD the flexibility to increase Annual Mortgage Insurance Premiums. According to Mortgagee Letter 11-10, the increase in Annual Mortgage Insurance Premiums will be effective for all case numbers dated on or after April 18th 2011.
HUD is implementing a 25 basis point increase in the annual premium for terms of greater than 15 years and equal to or less than 15 years. On loans with greater than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps). If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps).
On loans equal to or less than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 10%, the new Annual Premium is 25 basis points (bps). If the down payment is less than 10%, the new Annual Premium is 50 basis points (bps).
Upfront Mortgage Insurance Premium
Effective for loans on or after October 4th, 2010, for FHA regular purchases and refinance products, the Upfront Mortgage Insurance Premium is 1.00%, which decreased from 1.5%. This amount remains unchanged.
FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:
New FHA Annual Mortgage Insurance Premium
President Obama signed a bill in August of 2010 giving HUD the flexibility to increase Annual Mortgage Insurance Premiums. According to Mortgagee Letter 11-10, the increase in Annual Mortgage Insurance Premiums will be effective for all case numbers dated on or after April 18th 2011.
HUD is implementing a 25 basis point increase in the annual premium for terms of greater than 15 years and equal to or less than 15 years. On loans with greater than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 5%, the new Annual Premium is 110 basis points (bps). If the down payment is less than 5%, the new Annual Premium is 115 basis points (bps).
On loans equal to or less than 15 year terms, the new amount depends on the down payment. If the down payment is equal to or greater than 10%, the new Annual Premium is 25 basis points (bps). If the down payment is less than 10%, the new Annual Premium is 50 basis points (bps).
Upfront Mortgage Insurance Premium
Effective for loans on or after October 4th, 2010, for FHA regular purchases and refinance products, the Upfront Mortgage Insurance Premium is 1.00%, which decreased from 1.5%. This amount remains unchanged.
FHA's monthly mortgage insurance payments will be automatically terminated when these conditions occur:
- For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
- For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
- Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.
FHA Requirements: Closing Costs
While FHA requirements define which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office. All other costs are generally not allowed and are usually paid by the seller when buying a new home, or paid by the lender when refinancing your exising FHA loan.
- Lender's origination fee
- Deposit verification fees
- Attorney's fees
- The appraisal fee and any inspection fees
- Lender's origination fee
- Cost of title insurance and title examination
- Document preparation (by a third party)
- Property survey
- Credit reports (actual costs)
- Transfer stamps, recording fees, and taxes
- Test and certification fees
- Home inspection fees up to $200
FHA Requirements: Credit Guidelines
Before approving a loan, the lender analyzes the integrity of the borrower's past credit performance. Based on FHA requirements, those who have a good credit history demonstrated by a solid track record of timely payments will likely be eligible for a loan. Potential borrower's whose credit history is marred by slow payments, poor financial judgment and delinquent accounts is not a good candidate for loan approval.
The following is a list of items concerning the borrower's credit:
NO CREDIT HISTORYTwo lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms.
CHAPTER 13 BANKRUPTCYFHA will consider appoving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
CHAPTER 7 BANKRUPTCYAt least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.
LATE PAYMENTSDuring an underwriter analysis of borrower credit, the overall pattern of credit behavior is being reviewed rather than isolated cases of slow payments. If a good payment pattern has been maintained, regardless of a specific perod of financial difficulty preceded it, the borrower may escape disqualification.
FORECLOSUREFHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.
COLLECTIONS, JUDGEMENTS AND FEDERAL DEBTSA collection is minor in nature usually does not need to be paid off as a condition for loan approval. It is stated as such in FHA guidelines. Any judgments will have to be paid in full prior to closing. Borrowers who are delinquent on any federal debt, such as tax liens, student loans, etc., are not eligible.
The following is a list of items concerning the borrower's credit:
NO CREDIT HISTORYTwo lines of credit are necessary to apply for an FHA loan. However, in the event a borrower does not have sufficient credit on their credit report the FHA will allow substitute forms.
CHAPTER 13 BANKRUPTCYFHA will consider appoving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
CHAPTER 7 BANKRUPTCYAt least two years must have elapsed since the discharge date of the borrower and / or spouse's Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.
LATE PAYMENTSDuring an underwriter analysis of borrower credit, the overall pattern of credit behavior is being reviewed rather than isolated cases of slow payments. If a good payment pattern has been maintained, regardless of a specific perod of financial difficulty preceded it, the borrower may escape disqualification.
FORECLOSUREFHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit. This does not include the inability to sell a home when transferring from one area to another.
COLLECTIONS, JUDGEMENTS AND FEDERAL DEBTSA collection is minor in nature usually does not need to be paid off as a condition for loan approval. It is stated as such in FHA guidelines. Any judgments will have to be paid in full prior to closing. Borrowers who are delinquent on any federal debt, such as tax liens, student loans, etc., are not eligible.
FHA Requirements: Debt Ratios
In order to prevent homebuyers from getting into a home they cannot afford, FHA requirements and guidelines have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios. These ratios are used to calculate whether or not the potential borrower is in a financial position that would allow them to meet the demands that are often included in owning a home. The two ratios are as follows:
1) MORTGAGE PAYMENT EXPENSE TO EFFECTIVE INCOME Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 29%. See the following example:
Total amount of new house payment: $750Borrower's gross monthly income (including spouse, if married) : $2,850 Divide total house payment by gross monthly income: $750/$2,850Debt to income ratio: 26.32%
2) TOTAL FIXED PAYMENT TO EFFECTIVE INCOME Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 41%. See the following example:
Total amount of new house payment: $750 Total amount of monthly recurring debt: $400 Total amount of monthly debt: $1,150 Borrower's gross monthly income (including spouse, if married): $2,850 Divide total monthly debt by gross monthly income: $1,150/$2,850 Debt to income ratio: 40.35%
Please note that the above indicators do not exclusively determine whether or not a candidate will qualify for an FHA loan. Other factors will be considered, including credit history and job stability.
1) MORTGAGE PAYMENT EXPENSE TO EFFECTIVE INCOME Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 29%. See the following example:
Total amount of new house payment: $750Borrower's gross monthly income (including spouse, if married) : $2,850 Divide total house payment by gross monthly income: $750/$2,850Debt to income ratio: 26.32%
2) TOTAL FIXED PAYMENT TO EFFECTIVE INCOME Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 41%. See the following example:
Total amount of new house payment: $750 Total amount of monthly recurring debt: $400 Total amount of monthly debt: $1,150 Borrower's gross monthly income (including spouse, if married): $2,850 Divide total monthly debt by gross monthly income: $1,150/$2,850 Debt to income ratio: 40.35%
Please note that the above indicators do not exclusively determine whether or not a candidate will qualify for an FHA loan. Other factors will be considered, including credit history and job stability.
