When the FHA and HUD published HUD 4000.1, that document became the comprehensive rule book for FHA single family home loans and refinance loans. Many policies were updated, amended, altered or restated and there’s no way to compare all the changes with the previous version of FHA home loan rules found in HUD 4155.1 and HUD 4155.2.
With that in mind we have been examining important sections of HUD 4000.1 to learn what the most up-to-date FHA loan policies are. Today we’re examining the FHA loan rules for maximum loan amounts. HUD 4000.1 begins this section by explaining the basics:
“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. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction. Under most programs, the maximum Mortgage is the lesser of the Nationwide Mortgage Limit for the area, or a percentage of the Adjusted Value.”
New purchase loans and refinance loans are covered individually. The “adjusted value” for new purchase loans is the lesser of the purchase price (minus any inducements to purchase) or the property value. For refinance loans, there is an important distinction between properties that were purchased within 12 months of the FHA case number assignment or later than 12 months.
According to HUD 4000.1:
“For Properties acquired by the Borrower within 12 months of the case number assignment date, the Adjusted Value is the lesser of the Borrowers purchase price, plus any documented improvements made
subsequent to the purchase; or the Property Value.”
“Properties acquired by the Borrower within 12 months of case number assignment by inheritance or through a gift from a Family Member may utilize the calculation of Adjusted Value for properties purchased 12 months or greater. For properties acquired by the Borrower greater than or equal to 12 months prior to the case number assignment date, the Adjusted Value is the Property Value.”
For more information on how these rules affect your transaction, talk to your loan officer. Remember that FHA loan guaranty limits–the amount which the FHA will insure–varies depending on your housing market. You can look up those limits at the FHA/HUD official site.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
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