FHA Maximum offer (roughly)? (loan, pre-approved, credit card, fee charge)

[stezlaki]

We are relocating 1800 miles away and planning on purchasing a house. Due to previous credit issues and lack of significant cash, we are probably going to end up with an FHA loan. The FHA max for the area we are looking at is $276,250 and we will have about $7k cash. Our combined income will be $115k at the least, and we only have a couple of car payments to make (no credit cards, etc.).

I had been working with a lender the past 2-3 weeks to get "pre-approved." Now that I am flying there tomorrow to look at houses and hopefully make offers, I can't seem to get anybody to call me back or give me straight answers (now trying with 3 different lenders). All anybody will tell me is "there won't be a problem getting you approved." The whole purpose for dealing with the original guy for the last 2+ weeks was to get PRE-APPROVED. We filled out tons of stuff in detail with account numbers, balances, cash on hand, etc. and he ran our credit (two of mine were in the 700's and the third in the 600's...........my wife's were lower, but I'm not sure what they were). He then proceeded to tell me everything was fine and we wouldn't have a problem getting the FHA as we were "pre-qualified." My understanding was that "pre-approval" was different and more reassuring to the seller when making an offer. He assured me that "pre-qualified" and "pre-approved" were the same thing..................

Anyhow, on to the question. There is a house that we REALLY want, but is listed at $299k. It has, however been on the market for about 1.5 years. The last price reduction was done in January. Since I'm obviously not going to be "pre-approved" when looking at houses tomorrow, what I would like to know is ROUGHLY how much we can offer on a house if we go FHA and have $7k cash. I know that this is a question that the local lenders SHOULD be able to answer more easily and accurately than members of this board (due to local differences), but can somebody give me SOME sort of idea, rule of thumb, something? I don't want to waste everybody's time by making an offer we can't finance.

One lender is telling me they can't tell me that until they do all the specifics (so DO THEM??? I've offered to send everything they need), another that has done all the specifics says they can't tell me that until I make an offer on a specific house (which I've been telling him from the beginning that we wanted to try to get a SPECIFIC house and gave him all the details), and the third I can't seem to get in touch with.

Is it REALLY that difficult? Don't these guys have a spreadsheet program? I'm not asking for the specific cents, just an idea! I have absolutely NO CLUE what closing costs might be, or even what all they consist of.......I haven't bought a house since 1998! I'm starting to think that these people don't want to tell you any numbers because they are afraid you'll compare them to the next guy. I just don't get it, really............

If there is any way any of you can give me an educated guess and even walk me through the math if you are so inclined, I'd appreciate it. I obviously don't expect you to be 100% accurate!

[Daddys///M3]

$7000 will only cover the 3% total required minimum cash contribution to a purchase price of $233,333.33. However, you could look into the Nehemiah program or some other non-profit down payment assistance as the minimum cash contribution may be a gift from acceptable sources. You will want to keep in mind that the seller must donate this gift back to the non-profit when you make your offer.

[stezlaki]

Originally Posted by Daddys///M3

$7000 will only cover the 3% total required minimum cash contribution to a purchase price of $233,333.33. However, you could look into the Nehemiah program or some other non-profit down payment assistance as the minimum cash contribution may be a gift from acceptable sources. You will want to keep in mind that the seller must donate this gift back to the non-profit when you make your offer.

Oops..........I thought the 3% was required if the down payment was coming from other sources (seller, non-profit, gift, etc.). I thought I had read in a few different places that if the cash was your own the minimum cash contribution was 2.25%. If that were true we'd have enough to cover the full FHA max of $276,250. Does this vary from place to place (or institution to institution) or did I just find some inaccurate information?

I'm not sure I understand what you said about the seller donating the gift back to a non-profit down payment assistance source. Doesn't that just mean the seller is actually paying the down payment? If so, what's the point of the assistance program?

[Daddys///M3]

The seller is not allowed to contribute directly to your down payment, so Nehemiah and other down payment assistance programs circumvent that by "gifting" the down payment to you, and after the transaction the seller "donates" the gift plus a small processing fee back to the DPA program. If you go this route the DPA gift covers the required cash contribution, and you don't have to come in with any more money. FHA will go to 97.75% loan to value in states with closing costs above 2.1% of the sales price and 97.15 in states with closing costs below 2.1% of the sales amount (depending on loan amount), but still requires a 3% cash investment.

Straight from the 4155r-5:


Except for certain property and transaction types as described in 1-8 below, the lower of the adjusted sales price or the appraised value is multiplied by the factor shown in the chart below. The resulting amount is the maximum loan that FHA will insure provided that the mortgagor has made a cash investment of at least three percent of the contract sales price.

Borrower-paid closing costs may be used to meet the three percent minimum cash investment. If the borrower pays no closing costs at settlement, the loan amount must be reduced sufficiently so that the three percent minimum cash investment is met.

The maximum LTV limits shown below are functions of the property’s appraised value or the adjusted sales price (whichever is less) and the State in which the property is located. (A list of states and their closing costs averages may be found in Appendix II.) The maximum LTVs for most purchase transactions are as follows:

Maximum Loan-to-Value Percentages
(Purchase Transactions Only on Proposed and Existing Construction)
States with Average Closings Costs At or Below 2.1 Percent of Sales Price

98.75 percent: For properties with values/sales prices equal to or less than $50,000

97.65 percent: For properties with values/sales prices in excess of $50,000 up to $125,000

97.15 percent: For properties with values/sales prices in excess of $125,000

States with Average Closings Costs Above 2.1 Percent of Sales Price

98.75 percent: For properties with values/sales prices equal to or less than $50,000

97.75 percent: For properties with values/sales prices in excess of $50,000




Our definition of closing costs does not include discount points or prepaid items and, thus, these fees and expenses cannot be used in meeting the cash investment requirements; see paragraph 1-9 A for additional information including a description of closing costs eligible for meeting the minimum cash investment requirement.


The borrower may pay for the appraisal and credit report with a credit card. However, when these fees are paid for in this manner, they may not be counted in meeting the minimum investment requirement.

Closing costs paid by the seller or lender may not be used to meet the minimum investment requirement. Subject to the limits described below, we are not concerned with the dollar amount of any particular fee charged to the seller.

[renriq02]

Most lenders say 3%, but it's really 2.25%.

You can have the seller pay up to 6% of the closing cost w/out any downpayment assistance.

You're set since you have 7k.

Origination fee is usually 1%....plus 3rd party fees will be over 2.1%.

[stezlaki]

Originally Posted by Daddys///M3

The seller is not allowed to contribute directly to your down payment, so Nehemiah and other down payment assistance programs circumvent that by "gifting" the down payment to you, and after the transaction the seller "donates" the gift plus a small processing fee back to the DPA program.

Ahhhh............now I see. I figured there had to be some sort of reasoning for the "programs," but I couldn't figure that out on my own!

Thanks Daddys///M3 and renriq02 for the responses/explanations!

[Daddys///M3]

Originally Posted by renriq02

Most lenders say 3%, but it's really 2.25%.

You can have the seller pay up to 6% of the closing cost w/out any downpayment assistance.

You're set since you have 7k.

Origination fee is usually 1%....plus 3rd party fees will be over 2.1%.

According to the 4155, the minimum cash contribution is 3%, with a max LTV of 97.75% depending on high cost state status and purchase price. Is this info incorrect?

Also, TB&W will actually allow 6% seller concessions AND the 3% DPA.

[renriq02]

I have used 2.25% as the minimum many times.
FHA updates their guidelines all the time...or maybe the U/W doesnt pay attention lol
All FHA lenders allow up to 6% seller concessions.

I run DU/LP, and I get the approve/eligible. This is probably why they allow the 2.25% instead of 3%

Originally Posted by Daddys///M3

According to the 4155, the minimum cash contribution is 3%, with a max LTV of 97.75% depending on high cost state status and purchase price. Is this info incorrect?

Also, TB&W will actually allow 6% seller concessions AND the 3% DPA.

[Daddys///M3]

Originally Posted by renriq02

I have used 2.25% as the minimum many times.
FHA updates their guidelines all the time...or maybe the U/W doesnt pay attention lol
All FHA lenders allow up to 6% seller concessions.

I run DU/LP, and I get the approve/eligible. This is probably why they allow the 2.25% instead of 3%

Thanks for the info, I'll have to try running AUS with the 2.25%. I misunderstood what you were saying about the seller concessions before, I thought you meant 6% would be allowed if there was no DPA, but now realize that you meant 6% not including the DPA.