How Much Money Can I Borrow With an FHA Mortgage?
August 11, 2023
It’s a simple question. How much can you borrow using an FHA mortgage? The answer to that question isn’t as simple as some would like.
Why? Because the amount you are allowed to borrow is informed in part by FHA loan limits for the area you want to buy the home in, by the appraised value of the home, and by how much of a down payment you may be required to make.
FHA Loan Limits by County
Each year the FHA and HUD establish FHA loan limits by county. According to HUD.gov, in 2022, the FHA issued Mortgagee Letter 2022-20, establishing the “floor” for FHA loan limits and the “ceiling” for them in high-cost areas.
A non-conforming FHA loan, also known as an FHA jumbo loan, may exceed these limits, but there may be higher credit score requirements to do so.
FHA Loan Limits and the Appraisal
No matter what the FHA loan limit might be for your housing market if the home's appraised value is lower than that limit, the appraised value will be used in part as the benchmark for the loan amount.
The loan amount will be based on the appraised value plus approved add-ons to the loan, such as an FHA energy-efficient mortgage option, financed closing costs, or financed FHA mortgage insurance fees.
FHA Loan Amounts and Your Down Payment
You cannot borrow money from the FHA to make a down payment. FHA loans require the borrower to provide a “minimum cash investment” of either 3.5% or 10% down, depending on FICO scores.
Some borrowers hope to also borrow a down payment as part of their FHA loan, but this is not allowed.
FHA Loan Amounts and Left Over Loan Funds
Some FHA mortgages might be approved for amounts that change later. One reason the numbers could change is that the seller later agrees to pay a concession to the borrower to help with closing costs or other expenses.
If your loan is approved for $200,000 and the seller agrees to pay six percent in seller concessions, some might assume they could take excess loan funds in cash at closing.
Do not expect this. FHA loan rules are designed to prevent the borrower from taking cash at closing time except for refunds.
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Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
Why? Because the amount you are allowed to borrow is informed in part by FHA loan limits for the area you want to buy the home in, by the appraised value of the home, and by how much of a down payment you may be required to make.
FHA Loan Limits by County
Each year the FHA and HUD establish FHA loan limits by county. According to HUD.gov, in 2022, the FHA issued Mortgagee Letter 2022-20, establishing the “floor” for FHA loan limits and the “ceiling” for them in high-cost areas.
- For calendar year 2023, the FHA nationwide forward mortgage limit "floor" is $472,030 for asingle-unit home.
- For calendar year 2023, the "ceiling" for a single-unit home is $1,089,300.
A non-conforming FHA loan, also known as an FHA jumbo loan, may exceed these limits, but there may be higher credit score requirements to do so.
FHA Loan Limits and the Appraisal
No matter what the FHA loan limit might be for your housing market if the home's appraised value is lower than that limit, the appraised value will be used in part as the benchmark for the loan amount.
The loan amount will be based on the appraised value plus approved add-ons to the loan, such as an FHA energy-efficient mortgage option, financed closing costs, or financed FHA mortgage insurance fees.
FHA Loan Amounts and Your Down Payment
You cannot borrow money from the FHA to make a down payment. FHA loans require the borrower to provide a “minimum cash investment” of either 3.5% or 10% down, depending on FICO scores.
Some borrowers hope to also borrow a down payment as part of their FHA loan, but this is not allowed.
FHA Loan Amounts and Left Over Loan Funds
Some FHA mortgages might be approved for amounts that change later. One reason the numbers could change is that the seller later agrees to pay a concession to the borrower to help with closing costs or other expenses.
If your loan is approved for $200,000 and the seller agrees to pay six percent in seller concessions, some might assume they could take excess loan funds in cash at closing.
Do not expect this. FHA loan rules are designed to prevent the borrower from taking cash at closing time except for refunds.
------------------------------
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
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