FHA Loan Terms
What current FHA Loan Terms for Purchase and Refinance?
To meet the current terms for FHA Loans, you will need the following:
- Your income and your monthly expenses must be within certain guidelines. Standard FHA Loan Requirement debt-to-income ratios are 31/43. These ratios may be exceeded with compensation factors.
- Your credit history must meet certain guidelines (this is important, but FHA's credit standards are flexible). A 640 FICO credit score is required to obtain an FHA approval.
Current FHA Loan Terms state that your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (31% ratio). You must also have enough income to pay your housing costs plus all additional monthly debt (43% ratio). These percentages may be exceeded with compensating factors.
What is the maximum amount that I can borrow?
The maximum loan amount under today's FHA Loan Terms is determined by:
Maximum FHA loan amount: By law, FHA Lenders cannot insure loans that exceed certain amounts based on the metropolitan area or county in which you live. The highest maximum FHA mortgage right now is $729,750. The lowest FHA lender maximum amount available in any county is $271,050. To see what the limit is in the county in which you're interested, visit the following site https://entp.hud.gov/idapp/html/hicostlook.cfm. This site lists U.S. territories as well as states.
Maximum FHA Financing: Depending on the state where the property is located, FHA Loan Requirements state that the maximum financing will be 97.75% of the lower of the purchase price, the appraised value of the home or the amount you are refinancing plus closing costs. If you are refinancing and taking cash out, the loan will be limited to 85% of the appraised value.
What term lengths are available for FHA Loans?
Fixed rate loans - FHA fixed rate loans are offeres in terms of 30 and 15 years. In a fixed rate mortgage, your interest rate stays the same during the whole loan period, usually 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.
Adjustable rate loans - Most first-time home buyers are a little stretched financially, so they want payments as low as possible at the beginning. With FHA's adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. FHA uses the 1-Year Constant Maturity Treasury Index (1 Yr CMT the most widely used index, to calculate the changes in interest rates. An index is a measure of interest rate changes that determine how much the interest rate on an ARM will change over time.