FHA Loan Limits
Written by: Martina Hargrove
There are FHA financing programs available for single and up to four-family homes, mobile homes, condos, for home improvement purposes, and special programs in place for those with low income levels. The maximum amount of an FHA loan limit will depend upon the location the borrower lives in, as well as the type of dwelling being purchased or built.
The FHA loan limits in your specific area can easily be checked online, using your state, then the name of the county or city the property is in. For example, in California, the limits for a single family dwelling currently range from $218,000 to $362,790, while in Kansas, the lower limit begins at $200,160, with the higher limit being a little over $204,000.
The Benefits of FHA Home Loans for First-Time Buyers
For those of us with less than perfect credit, or who have either a small amount, or even no money down, FHA home loans through the Federal Housing Administration, a division of the Department of Housing and Urban Development, may be the answer you've been looking for to purchase your very first home.
Over 70 years ago, the FHA was created in order to give first-time home buyers the opportunity to purchase a home without needing a large amount of money down, or to assist those families with a low to moderate income.
Some of the benefits associated with FHA home loans include:
1. FHA home loans don't require large down payments: For an FHA loan, only three percent is required for a down payment on the home, which is $30 per every $1,000.
2. You don't need a good credit score to qualify for FHA home loans: The FHA doesn't consider a borrower's actual credit score number to determine if their loan will be approved or not. What matters more is how the person has paid their bills during at least the last two years, how much credit you have, and how often you apply for new credit.
Also, if you've declared bankruptcy, the FHA requires that you wait two years from the discharge date to qualify, provided you maintain good credit during that time. Those who have previously lost a home through foreclosure must wait at least three years while maintaining a good credit history to be considered.
3. You may have other debt and still quality for FHA home loans: The borrower's debt-to-income ratio for FHA home loans may be much higher and still be allow them to be qualified, as opposed to most conventional loans.
To find out if your ratio is within the limits, add all of your mortgage costs, including the principal, interest, and any insurance and taxes to your other monthly financial obligations, such as any other loans, including auto or student loans, as well as all credit card debts. Other costs including food, transportation, or utilities are not considered part of the equation and shouldn't be factored in.
Finally, divide this total amount by your monthly pre-tax income. If the total of your monthly debts are no more than 41% of your income, you may qualify for an FHA home loan, whereas the usual percentage of most conventional loans is 36%.
4. FHA home loans offer competitive rates: You could almost bank on the fact that an FHA loan will be considerably less expensive than an adjustable rate mortgage (ARM), or a subprime loan. Of course, the exact interest rate will largely depend on your credit and employment histories, with lower rates going to those with a proven record of paying their bills on time. Usually, an FHA loan will cost approximately an eighth of a percentage point over the rate of any other type of conventional loan that you would be approved for.
5. FHA home loans feature several types of mortgages: A program through the FHA known as GEMs, or Growing Equity Mortgages, allow borrowers to make relatively low monthly mortgage payments for the first few years of their loan, gradually increasing that amount over time, usually during the first decade of the loan. The GMP, Graduated Mortgage Payment plan also allows borrowers to make smaller payments as their income increases during the first five to 10 years of their mortgage.
