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Unformatted text preview: below, that the FHA does place a dollar– limit on the maximum insured loan. FHA LOAN AMOUNTS
Before writing up a purchase contract, a salesperson must know how the FHA calculates the maximum amount. Both FHA and conventional lenders base their loans on a fixed percentage of the lower of the property's sales price or appraised value. FHA multiplies this result by an appropriate percentage in order to determine the maximum loan amount it will insure. Maximums vary within states, and state–to–state, depending upon whether FHA has designated them as “low closing cost” or “high closing cost” states. 5-28 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 5: GOVERNMENT PARTICIPATION & BACKED LOANS
California is classified as a “low closing cost” state. MAXIMUM FHA LOAN AMOUNTS
The percentages, based on the lower of sales price/appraised value are as follows: Low Closing Costs States - $50,000 or less Over $50,000, up to $125,000 Over $125,000, up to allowed maximum High Closing Costs States $50,000 or less Over $50,000, up to allowed maximum 98.75% 97.65% 97.15% 98.75% 97.75% These limitations prevail as long as the borrower has a cash investment of at least 3% in the property. If the borrower has no investment in the property other than the down payment, the loan–to–value ratios will drop to an even 97%. The 3% investment is ordinarily composed of down payment, plus the payment of enough qualifying nonrecurring closing costs to make up the difference. If the borrower invests more than 3%, the above–shown ratios apply. Discount points are not considered, nor are “prepaids,” such as taxes, insurance, and interest. Allowable nonrecurring closing costs include such items as: loan origination fee, appraisal fee, credit report fee, title, and escrow fees. In calculating the percentage of investment, only the lower of sales price/appraised value is considered. However, the allowable closing costs may be counted in the process...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10