FHA Loan to Value

Posted on January 2, 2009
Filed Under FHA Home Loans, Home Loans | Leave a Comment

FHA Purchase Loans and FHA Refinance Loans have new loan to value (LTV) requirements that lenders, real estate agents and borrowers need to become familiar with as they become effective on Jan 1st, 2009.

FHA Purchase Loans

The HERA – Housing and Economic Recovery Act of 2008 revised the down payment requirements for FHA purchase loans.

1) Requires 3.5 percent down payment based on the appraised value of the property.

2) Eliminate the prior method of calculating down payment which included the combination of the property value and the closing costs average to the area where the proeperty is located.

As of Oct. 1st 2008 thru September 30th 2009 FHA purchase loans will require an upfront mortgage insurance premium (ufmip) of 1.75% which is added to the loan amount.

3) Limit the total fha insured mortgage to 100% of the appraised value of the property and include the (ufmip) upfront mortgage insurance premium within that limit.

Closing costs are not longer part of the calculation of determining the maximum mortgage amount. Thus, for purchase money mortgages the maximum LTV is 96.5 percent since the borrowers down payment is 3.5% based on the lessor of the appraised value of the property of the adjusted sales price less any required adjustments.

Sellers may credit up to 6% of the value of the sales price towards closing costs. Any amount over 6% must be subtracted from the sales price or value whichever is less before calculating the maximum mortgage amount.

The risk based pricing model has been done away with.

FHA Refinance Loans

Rate and Term Refinance – 97.75% Max LTV + 1.75% UFMIP

FHA to FHA Streamline with Appraisal – 97.75 Max LTV + 1.50% UFMIP

FHA to FHA Streamline without Appraisal – Lower of 2 calculations + 1.5% UFMIP

Cash out Refinances – 95% and 85% – 1.75% UFMIP

All cash out refinance transactions over 85% LTV will require a second appraisal.

Monthly MIP for Purchase loans, Full qualifying refinance loans and streamline refinances is as follows:

30 Year Mortgage

LTV < 95% = 50 Basis Points
LTV > 95% = 55 Basis Points

15 Year Mortgage

LTV < 95% = None
LTV > 95% = 25 Basis Points


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