Does the FHA guarantee the total loan amount after the 3.5% down

Question

Hi all,

I wanted to ask a clarifying question on FHA loan limits. I know there are caps for the amount of loan you can receive under FHA, depending on the area you are looking to buy in, however, my question is, is there a cap on the loan amount you can get? For example, if we are looking in an area that has a FHA loan limit of $500,000, and I find a property for that amount- as long as I put down 3.5%, will the FHA loan me the remaining $482,500, or are there situations where they won't lend me the entire remaining amount?

I only ask because under a conventional loan, even if you put down 20%,  you still need to shop within the mortgage loan you were pre-approved for. For example, if the bank only approved you for $400,000, you wouldn't be able to buy a home that's $600,000 since 20% of $600,000 still puts you above the $400,000 you were pre-approved for. But if I were to get a $600,000 home under FHA, I could still theoretically get it because all I need is 3.5% and the FHA will loan me the rest, as long as it's at or under the loan cap rate for that area?

Thanks in advance for your input!

Grace

Andrew Postell · Answer

@Grace Kwon I think I understand what you are asking but if I am misunderstanding something please let me know...

Your prequalification letter should outline the specifics of your qualifications.  So if you are prequalified for a $100,000 house, the letter will state what the maximum loan amount is...and usually what your downpayment amount is too.

So if you CANNOT afford the maximum loan limit....then the loan maximum doesn't matter.  Meaning, if you can only afford $100,000 purchase price, but loan maximum is $125,000...then you can only afford the $100,000 amount.

And just to clarify, using your $600,000 example...if that is the loan maximum, but you can only qualify for $500,000 loan...then $500,000 is your personal maximum.  I hope all of this makes sense.