I'm tentatively looking at a townhome in Boulder, Co. The listing price is $80k over the FHA loan limit for the county, but the listing details state that FHA and VA loans (along with conventional and cash) are accepted. I assume this is some sort of misprint? Or would it only be applicable if you put enough down that the total loan value is less than the limit (in which case defeating the low downpayment benefit of an FHA loan?)
For FHA one would have to get the loan amount down to the limit - thus the 80k. Then pay 3.5% downpayment of the finance amount.
I was told something completely different:
I was told you need to put down 3.5% of the purchase price. For instance, if the loan limit is $297,500, the house price should be no greater than $308,290. If you put $10,790 down (3.5%), that would get you down to the loan limit of $297,500. However, if the purchase price was an extra $1000 more like $309,290, you would need $1K + $10790. For every dime you go above that, you need to come up with it out of your pocket.
Besides, what is the point of a "loan limit" if you can never realistically get a loan amount for the "full limit"...hence "loan limit". Doesn't the name alone suggest the most you can borrow is the limit?
Yup thats what I was told too. If the price of the home is way over the limit, you will be putting a lot more down then 3.5 percent to hit the limit.
Otherwise you could never finance at the FHA limit, it would be always 3.5 percent lower then the limit.
We just bought a place that was over the loan limit. We put down 3.5% and that took us below the loan limit. We didn't have to put down another 3.5% based off the loan limit.
So in the example above, the person would just need the 80K as that would be more than 3.5% of the purchase price.
I'm fairly certain about that, but then Dallas has a lot more experience with this than I do.
You guys are right on.Down payment is 3.5% of purchase price. Thus you can buy a house that is (your county limit * 1.035) without having to pay anything additional. The county limit is only for the amount financed, not the total purchase price. You could buy that million dollar home with FHA, if you can come up with the difference above the limit.
Of additional note, keep In mind that your UFMIP does NOT count against you if you choose to finance it. In my area, the county limit is 353,750. My FHA loan is for 359,xxx, because the total financed can exceed the limit but only for your upfront MIP.
If that isn't clear, I can try to elaborate more.