2. Calculating Maximum Mortgage Amounts on Purchases

Introduction

This topic contains information on maximum mortgage amounts for purchasing property, including

•	the maximum insurable mortgage

•	up-front mortgage insurance payments (UFMIP)

•	statutory loan limits, and

•	loan-to-value (LTV) limits.

Change Date

May 10, 2009

4155.1 2.A.1.a Maximum Insurable Mortgage

The maximum insurable mortgage is the lesser of the

•	statutory loan limit for the area (typically a county, or metropolitan statistical area (MSA)), or

•	applicable loan-to-value (LTV) limit, applied to the lesser of
	–	the sales price, or
	–	the appraised value.

The Department of Housing and Urban Development (HUD) issues a Mortgagee Letter (ML) each year, announcing the new mortgage limits.

4155.1 2.A.1.b Up-Front Mortgage Insurance Payments

Most Federal Housing Administration (FHA) mortgages require the payment of an up-front mortgage insurance premium (UFMIP). The statutory loan amounts and LTV limits discussed in this handbook do not include the UFMIP.

4155.1 2.A.1.c Statutory Loan Limits

Statutory loan amount limits vary by program and the number of family units within the dwelling.

References:

•	For current FHA standard and high-cost area mortgage limits, see
	–	the Department of Housing and Urban Development (HUD) Web site at www.hud.gov, or
	–	the FHA Connection at https://entp.hud.gov/clas/.

•	For information on the effect that secondary financing has on loan limits, see HUD 4155.1 5.C.

4155.1 2.A.1.d LTV Limits

The determination of the maximum LTV percentage available to the borrower is influenced by

•	the particular mortgage insurance program

•	the age of the property (for example, new or existing construction), and

•	various transactions that affect the maximum mortgage calculation, as described in HUD 4155.1 2.B.

Once determined, the LTV percentage is then applied to the lesser of the sales price or the appraised value in order to determine the maximum insurable mortgage.

References: For more information on

•	calculating maximum mortgage amounts, see HUD 4155.1 2.A.2

•	transactions that affect maximum mortgage calculations, see HUD 4155.1 2.B, and

•	the effect that secondary financing has on LTV limits, see HUD 4155.1 5.C.5.