For hypothetical purposes, a home is located in a low closing cost area of a state and it's selling for $400,000.
It was appraised at $410,000.
The FHA max ceiling for the loan is $390,000.
The maximum amount that the buyer would be able to receive is the FHA max of $390,000.
Is this fact true or false ?
Please take your time. The solution is poted below the wildlife photo.
The FHA will have a maximum loan amount available based under the FHA's LTV (loan to value) rules.
In a state that is low-closing recognized and the price of the property or it's value is over $125,000 the maximum LTV would be 97.15% of the lessor of the property's appraised value or sales price.
The selling price is lower so we multiply 97.15% times 400k and here's what it looks like :
400000 selling price
0.9715 or 97.15% of the selling price
388600 max amount available for the loan
$388,600 is less than the amount that the FHA will loan, $390,000, so the buyer will qualify.
The ceiling and FHA percentages may have changed since I wrote this entry, so please remember to check with your lender to see what the conforming rates are at this time.
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