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

[Grace Kwon]

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