FHA Lending Limit On Purchase And Refinance Transactions

This BLOG On FHA Lending Limit On FHA Loans On Purchase And Refinance Transactions Was UPDATED On August 18th, 2018

Last year, the FHA lending limit was capped at $275,665 on single-family homes unless the property was located in a high-cost area. Both HUD and FHFA have increased loan limits for 2018. The increase of FHA Lending Limit by HUD and conforming loan limit by FHFA was due to rising home prices nationwide. FHFA first increased conforming loan limits to $453,100. HUD, the parent of FHA, following in increasing FHA Lending Limit on FHA Loans to $294,515.

• FHA lending limit increased in all counties in the United States effective January 2018
• Unless the property is located in a high-cost area where depending on the county, the FHA lending limit is now set at $294,515 effective January 2018
• Prior to increasing FHA lending limit, home buyers were limited on home purchases and max loan amount capped at $275,665
• For example, last year, if a home buyer who was qualified to purchase a home for $300,000, they could not have purchased it due to the $275,665 FHA Loan Limit cap 
• Now with the higher FHA Lending Limit, they are able to
• Now, the maximum loan amount that same home buyer will qualify for is a mortgage loan amount of $294,515
• If the home buyer wants to purchase a higher-priced home, he or she can do so
• However, they need to come up with the cash difference between the actual purchase price and the maximum loan amount of $294,515

In this article, we will discuss and cover FHA Lending Limit On FHA Loans On Purchase And Refinance Transactions.

Conventional Lending Limit

The conventional lending limit has been increased to $453,100.

• The conventional lending limit was increased by the Federal Housing Finance Agency (FHFA)
• Those homebuyers who want to purchase a higher-priced home and were seeking an FHA loan but are restricted to the new FHA lending limit of $294,515 will be forced to go through the conventional lending route
• However, conforming guidelines are much stricter than HUD guidelines
• For example, to qualify for an FHA home purchase loan with a 3.5% down payment, a home buyer only needs to have a 580 credit score
• For conventional loan programs, the minimum credit score required to qualify is 620 credit score
• The waiting period for an FHA loan after Chapter 7 bankruptcy is two years
• Conventional loan programs require a minimum of a 4-year waiting period after a bankruptcy
• The minimum waiting period after foreclosure for an FHA loan is three years from the recorded date of a foreclosure
• For conventional loan programs, there is a mandatory 7 year waiting period after a foreclosure
• Maximum debt to income ratios to qualify for an FHA loan is 56.9% DTI
• For conventional loan programs, the maximum debt to income ratios is capped at 45%
• FHA allows for multiple non-occupant co-borrowers to be added to the borrower for income qualifications
• Conventional loan programs do not allow for non-occupant co-borrowers
• 100% gift funds are allowed for FHA loan programs
• Conventional loans only allow a portion of the down payment to be gifted

If a home buyer is restricted due to the above restrictions on conventional loan lending guidelines, then FHA loan programs may be the only route to go.

Waiting Period After Deed In Lieu Or Short Sale: Conventional Loan

For those who have had a deed in lieu of foreclosure or short sale, they can qualify for a conventional loan if they have at least a 5% down payment on their home purchase after a four-year waiting period.

• This route may be a great alternative for homebuyers who had a deed in lieu of foreclosure or short sale and want to purchase a higher-priced home and need to get a loan that is higher than the FHA lending limit
• The biggest issue is that conventional loans have tougher lending requirements than FHA

2018 Update On Conventional Loan After Deed In Lieu And Short Sale

The two-year waiting period after a deed in lieu of foreclosure and short sale for a conventional loan with 20% down payment is no longer in effect.

• Fannie Mae has discontinued the two-year waiting period after a deed in lieu of foreclosure and short sale to qualify for a conventional loan with 20% down payment on August 2014
• New Fannie Mae mortgage lending guidelines to qualify for a conventional loan after a deed in lieu of foreclosure and a short sale is now four-year with 5% down payment and re-established credit

Home Buyers who need to qualify for a mortgage with a direct lender with no mortgage overlays, contact us at Gustan Cho Associates at 800-900-8569 or email us at gcho@gustancho.com. We have zero overlays on government and conventional loans. We are correspondent lenders on non-QM loans and bank statement loans for self-employed borrowers.