• Home
  • Rates
  • Lenders
  • Guidelines
  • Blog

Stated-Income

Understanding the FHA Loan Limits

January 10, 2019 By JMcHood

If you need a flexible loan with guidelines with low credit score requirements and high debt ratio allowances, you may want to explore the FHA loan. This loan allows a credit score as low as 580 and debt ratios as high as 43% in some cases.

Compare Offers from Several Mortgage Lenders.

Many people want to know just how much they can borrow with the FHA loan, though. Keep reading to find out how much you may be able to borrow.

The Basics

FHA loans typically follow the conventional loan maximums. This year that means a maximum loan of $453,100. This is the case in most areas. However, there are some ‘high cost’ areas where you can borrow more than this because the cost of living is higher.

The Upper FHA Loan Limits

The FHA labels counties based on their cost of living and average home price. You’ll see low-cost counties, high-cost counties and average counties.

The limit for low-cost counties is $294,515. This is the most you can borrow in what the FHA considers a low-cost county. The limit for high-cost counties is $679,650. If your county doesn’t fall within the low-cost or high-cost counties, it will fall somewhere in between. This means your county will have a limit higher than the low-cost county, but lower than the high-cost county.

What do Loan Limits Mean?

So how does the loan limit affect you? Let’s say your county loan limit is $453,100. Does that mean that you can borrow that much?

It doesn’t. You have to qualify for the loan amount, which is a lot different than being eligible for it. You must qualify or prove that you have the credit score, income, and debt ratio to afford for the loan. Luckily, FHA loans have flexible guidelines allowing you some wiggle room.

In order to qualify for an FHA loan, you’ll need the following basic requirements:

  • 580 credit score or higher – The FHA allows a credit score as low as 580, but not all lenders will allow it. Check with induvial lenders to find out their requirements.
  • 31% housing ratio – The FHA allows you to have a housing payment that equals as much as 31% of your gross monthly income (income before taxes).
  • 41% total debt ratio – The FHA allows you to have a total debt ratio that equals up to 41% of your gross monthly income. In some cases, lenders may allow as much as a 43% ratio.
  • Stable income – You must prove that your income is stable and reliable. It helps if you’ve been at the same job for the last two years, but if you have a newer job, don’t worry. You just need to prove stability and reliability.
  • 5% down payment – The FHA requires at least a 3.5% down payment on the home, but you can make the down payment from your own funds or gift funds from relatives or an employer.

Click to See the Latest Mortgage Rates.

That’s all that the FHA really requires. It’s a flexible loan program for many. It’s not just a first-time homebuyer’s loan as many people think of the FHA loan. If you need flexible guidelines, you may qualify for this loan.

The FHA’s Role

Something to keep in mind is that the FHA doesn’t underwrite or fund the loan. Your lender is in full control of whether or not you get approved. The FHA approves certain lenders to write loans in their name. As long as the lender follows the FHA rules, the FHA will guarantee the loan.

The guarantee the FHA provides is for the lender. They promise the lender that they will pay them back a portion of the money that they lose should you default. Even with that guaranty, some lenders make the guidelines a little stricter. They add what’s called lender overlays. They make it a little harder to get the loan so that the risk of default decreases.

FHA loans have flexible guidelines and varying loan limits. You can find the loan limits for your county here or you can ask your lender. This will give you an idea if FHA financing will be a good option for you based on the price of the home that you want to buy.

Click Here to Get Matched With a Lender.

Filed Under: Lending Guidelines

OUR EXPERTS SEEN ON

IMPORTANT MORTGAGE DISCLOSURES:

When inquiring about a mortgage on this site, this is not a mortgage application. Upon the completion of your inquiry, we will work hard to match you with a lender who may assist you with a mortgage application and provide mortgage product eligibility requirements for your individual situation.

Any mortgage product that a lender may offer you will carry fees or costs including closing costs, origination points, and/or refinancing fees. In many instances, fees or costs can amount to several thousand dollars and can be due upon the origination of the mortgage credit product.

When applying for a mortgage credit product, lenders will commonly require you to provide a valid social security number and submit to a credit check . Consumers who do not have the minimum acceptable credit required by the lender are unlikely to be approved for mortgage refinancing.

Minimum credit ratings may vary according to lender and mortgage product. In the event that you do not qualify for a credit rating based on the required minimum credit rating, a lender may or may not introduce you to a credit counseling service or credit improvement company who may or may not be able to assist you with improving your credit for a fee.

Copyright © Mortgage.info is not a government agency or a lender. Not affiliated with HUD, FHA, VA, FNMA or GNMA. We work hard to match you with local lenders for the mortgage you inquire about. This is not an offer to lend and we are not affiliated with your current mortgage servicer.

Contact Us | Terms of Use | Privacy Policy | Media | DMCA Policy | Anti-spam Policy | Unsubscribe

Buy Mortgage Leads

Mortgage.info

NMLS ID #1237615 | AZMB #0928735

8123 South Interport Blvd. Suite A, Englewood, CO 80112

CLICK TO SEE TODAY'S RATES