© HUD Single Family Housing Policy Handbook 4000.1
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 Limits for the area, or a percentage of the Adjusted Value.
For purchase transactions, the Adjusted Value is the lesser of:
- purchase price less any inducements to purchase; or
- the Property Value.
- For refinance transactions:
For Properties acquired by the Borrower within 12 months of the case number assignment date, the Adjusted Value is the lesser of:
- the Borrower’s 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.
Included in this section are:
i. National Housing Act’s Statutory Limits
ii. Nationwide Mortgage Limits
iii. Financing of Upfront Mortgage Insurance Premium
iv. Calculating Maximum Mortgage Amounts on Purchases
v. Additions to the Mortgage Amount for Repair and Improvement
i. National Housing Act’s Statutory Limits
The National Housing Act establishes the maximum Mortgage limits and the mortgage amounts for all FHA mortgage insurance programs.
ii. Nationwide Mortgage Limits
Mortgage limits are calculated based on the median house prices in accordance with the statute. FHA’s Single Family mortgage limits are set by Metropolitan Statistical Area and county and will be published periodically. FHA’s Single Family mortgage limits are available by MSA and county, or by downloading a complete listing. FHA publishes updated limits effective for each calendar year.
These limits will be set at or between the low cost area and high cost area limits based on the median house prices for the area.
(A) Requests for Local Increases
Any requests to change high-cost area Mortgage limits determined by HUD must be received by FHA’s Santa Ana Homeownership Center (HOC) at the address below no later than 30 Days from the publication of the limits each year. Any changes in area Mortgage limits as a result of valid appeals will be retroactively in effect for case numbers assigned on or after January 1 of each year.
Each request to change Mortgage limits must contain sufficient housing sales price data, listing one-family Properties sold in an area within the look-back period, January through August of the previous year. Requests should differentiate between Single Family residential Properties, and condominiums or cooperative housing units. Ideally, data provided should also distinguish between distressed and non-distressed sales. Requests for a change will only be considered for counties for which HUD does not already have home sales transaction data for the calculation of Mortgage limits.
All requests for local area increases in all areas will be handled exclusively by FHA’s Santa Ana HOC:
Attn: Program Support/Loan Limits
U.S. Department of Housing and Urban Development
Santa Ana Homeownership Center
Santa Ana Federal Building
34 Civic Center Plaza, Room 7015
Santa Ana, CA 92701-4003
(B) Low Cost Area
The FHA national low cost area mortgage limits, which are set at 65 percent of the national conforming limit of $424,100 for a one-unit Property, are, by property unit number, as follows:
- One-unit: $275,665
- Two-unit: $352,950
- Three-unit: $426,625
- Four-unit: $530,150
(C) High Cost Area
The FHA national high cost area mortgage limits, which are set at 150 percent of the national conforming limit of $424,100 for a one-unit Property, are, by property unit number, as follows:
- One-unit: $636,150
- Two-unit: $814,500
- Three-unit: $984,525
- Four-unit: $1,223,475
(D) Special Exceptions for Alaska, Hawaii, Guam, and the Virgin Islands
FHA adjusts mortgage limit ceilings for the special exception areas of Alaska (AK), Hawaii (HI), Guam (GU) and the Virgin Islands (VI) to account for higher costs of construction. These Special Exception Area limit ceilings are set at 150 percent of FHA’s High Cost Area mortgage limits, rounded down to the nearest $25. These four special exception areas have a higher ceiling as follows:
- One-unit: $954,225
- Two-unit: $1,221,750
- Three-unit: $1,476,775
- Four-unit: $1,835,200
iii. Financing of Upfront Mortgage Insurance Premium
Unless otherwise stated in this section (Origination through Post-Closing/Endorsement), restrictions to mortgage amounts and LTVs are based upon the amount prior to the financing of the Upfront Mortgage Insurance Premium (UFMIP) (Base Loan Amount). The total mortgage amount may be increased by the financed UFMIP amount.
iv. Calculating Maximum Mortgage Amounts on Purchases
The maximum mortgage amount that FHA will insure on a specific purchase is calculated by multiplying the appropriate LTV percentage by the Adjusted Value.
In order for FHA to insure this maximum mortgage amount, the Borrower must make a Minimum Required Investment (MRI) of at least 3.5 percent of the Adjusted Value.
iv. Additions to the Mortgage Amount for Repair and Improvement
(A) Appraiser Required Repairs
A Mortgagee may add repair costs to the sales price before calculating the mortgage amount if:
- the repairs are required by the Appraiser to meet HUD’s MPR;
- the repairs are paid for by the Borrower; and
- the sales contract or addendum identifies the Borrower as the party responsible for payment and completion of the repairs.
The maximum amount of repair costs that may be added to the sales price is the lesser of:
- the amount by which the value of the Property exceeds the sales price;
- the Appraiser’s estimate of repairs; or
- the amount of the contractor’s bid.
(B) Energy-Related Weatherization Repairs and Improvements
A Mortgagee may add energy-related weatherization costs, to be paid for by the Borrower, in accordance with Weatherization policies.
(C) Solar Energy Systems
A Mortgagee may add the cost of a solar energy system (including active and passive solar- and wind-driven systems) to the Mortgage in accordance with Solar and Wind Technologies policies.
When adding the cost of a solar energy system to the mortgage amount, the maximum insurable mortgage limit may be exceeded by up to 20 percent.