Determining the FHA Loan Amount Available to You

The maximum FHA loan amount a borrower can receive depends on factors set forth by HUD and FHA mandated with guidelines set forth by FHA.  Some of the factors include income, debt ratio, geographic area and type of loan you are applying for. Your FHA approved lender will work with you to determine the total amount you qualify for.  You will need to know your possible loan range in order to begin seeking a property or improvement project. Apply the following guidelines to help you understand the range you may be eligible for. 

Income to Loan Ratio

One of the first criteria a lender will assess is your ability to pay. This is determined on your gross income. Gross income is your income  before taxes. The standard ratio guideline states that 29% of your gross income is your monthly maximum alloted housing expense. For married couples, the total gross income will include the income of both husband and wife, if they are both listed on the FHA loan.

Income to Total Debt Ratio

The total debt-to-income ratio uses both housing and credit payments and is commonly referred to as "back-end" ratio.  The back-end ratio is calculated by including your proposed mortgage payment along with student loans, auto payments, credit card debt and personal loans, child support, etc.  The lender will determine the back-end ratio by using all of your debt and the guidelines state it cannot typically exceed 41% once divided into gross income.

Geographic Area

There is a county limit for FHA loans. FHA loan amounts depend on the median home price in your area. This policy was adopted in the 1980s and was controversial at the time. Many feel that the more expensive neighborhoods calling for high loan amounts, the highest in 2009 was around $729,750.00 should not be eligible for FHA home loans. The program was introduced to help low to middle income families. However, the policy has remained in tact, and loan limits are issued by county every year. 

Type of FHA Home Loan

There are limits on loans depending on the type of loan you are seeking. For example, as of 2009, the limit for refinancing was adjusted down to from 97% to 85% for certain loan amount ranges.  Limits have also been in place for depending on the property type, such as multi-family. These details are best discussed with an FHA loan advisor once you have evaluated the general criteria.  In general, FHA advises that a borrower can purchase a maximum of 96.50% of the sales price.  Put another way, a borrower must put down at least 3.5% to purchase a home.