Take advantage of the increased loan limits to buy a more expensive home in Middle Tennessee. FHA loans offer a lower down payment with lower minimum credit scores than regular conventional financing.

What are the FHA New Loan Limits?

FHA loan limits have been increased for 2022.  For single-family homes in Middle Tennessee, the FHA loan limit has been increased to $694,600.00.  This means that you can buy a larger, more expensive home with a much lower down payment than regular conventional financing!  The minimum down payment on these loans is 3.5%.  Luxury home available in Sumner County TN with increased FHA loan limits

FHA loans can be used to purchase single-family, duplex, triplex, and quad units.  But, since FHA requires owner-occupancy, you will have to live in one of the units.  The FHA loan limit (in Middle Tennessee) on a duplex is $889,200, tri-plex $1,074,800 and quad is $1,335,800.

Keep in mind that these limits can be different in every state or county.

You could even buy a home on a few acres and start a hobby farm.  FHA doesn’t exist to insure financing on farms – but a few acres can still be done with FHA financing.

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What is an FHA Loan?

According to Investopedia.com, an FHA loan is simply a mortgage that is insured by the Federal Housing Administration (FHA).  They do not make the loans, but simply insure them.  But guess what?  In my opinion, the one doing the insuring is YOU!  Because you have to purchase MIP (Mortgage Insurance Premium) in two ways.  First, there is a hefty 1.75% of the loan amount to be paid at closing.  This up-front fee can be added to your loan amount.  Then, there is a monthly fee added to your mortgage payment every month thereafter.  This can be quite expensive, so put your pencil to it when considering this type of loan.

Calculator with Mortgage Insurance Premium button
Consider the Hefty Fees that Comes with your FHA Loan.

Don’t confuse MIP with homeowners insurance, because MIP only insures the mortgage against default.  Homeowners insurance insures the physical properties.  Two completely different types of insurance.

There are also FHA loans for fixer-uppers – 203(k) loan is a rehab loan to make improvements to a property.  You can’t use this for any luxury upgrades – but it’s good for necessary renovations.  In case you haven’t already guessed, there is a tremendous amount of red tape associated with these loans.  Do your due diligence and make sure you know what you’re getting into.  New FHA loan limits are great – but make sure they work for you.

Always be sure to do a thorough home inspection on any property that you buy.  Check out my home inspection guide for ideas on what to look for.

Want my ideas on Buying a HUD home?  They might surprise you!

Determining Eligibility – Two Ratios Are Used

The first is your Debt-to-Income Ratio:

Add up your total proposed house payment including taxes, homeowners insurance, and any HOA dues/fees.

Then divide this by your gross monthly income.

Your answer can’t be over 31%.

For instance:

Your projected total monthly housing expense is $1,000

Your total monthly gross income is $4,000

Your debt to income ratio would be 25%

Fixed Payment to Effective Income Ratio:

Add up your total proposed house payment including taxes, homeowners insurance, and any HOA dues/fees (just like before)

Then add into this figure all monthly revolving or installment debt, student loans, credit card debt, etc.

This total should be divided by your total monthly income as before.

Your answer can’t be over 43%.

For instance:

Your projected total monthly housing expense is $1,000

Your total installment debt, credit cards, etc. is $500

Your total monthly gross income is $4,000

Your fixed payment to income ratio is now 37.5%

Closing Costs

What are the closing costs involved in an FHA loan?  The costs are much like any other mortgage loan and these costs can vary by lender.  But you will most likely have these costs to consider:

  • Origination fees – most common is 1%
  • Appraisal fee – Usually in this area $350 – $700
  • Title Search and Insurance – amounts vary by county
  • Transfer taxes – I consider this a sales tax on real estate
  • Well water testing – sometimes required by the lender
  • Credit Reports
    Take the Total Closing Costs into Consideration when Purchasing a New Home!
  • Recording fees
  • HOA fees
  • Courier fees
  • Funds transfer fees
  • Survey – usually not required unless acreage is involved

Escrow Setup will be included in the closing cost figures.  They will take the total amount for your mortgage insurance and real estate taxes, which you will pay for the year.  Then they will divide it by 12 months to get your monthly escrow charges that are added to your house payment.  The lender will then use the funds in this escrow account to pay your insurance and taxes when they come due.

Before you buy any property that has an HOA – be sure to know the HOA Rules.  They are legal, binding and can be expensive.

How does Bankruptcy, Foreclosures and Federal Debt affect these Loans?

Problems in the past?  You can usually work around them when applying for an FHA loan.  Every lender will have different company guidelines, but these are general guidelines for FHA loans:

  • Any legal judgments must be paid off before closing.
  • Foreclosure – you will usually have to wait 3 years before applying.
  • Bankruptcy – can usually be worked out.
    • Chapter 13 – As long as payments have been satisfactorily made and verified for one year.  You will have to have good credit re-established, good job stability, and be able to qualify financially.
    • Chapter 7 – You’ll have to wait two years from discharge to apply for a new FHA loan.  And as in the Chapter 13 requirements – you will have to have good credit re-established, good job stability, and be able to qualify financially.

With any type of bankruptcy, you will need a full letter of explanation given to the lender.

  • Federal Debt – Any federal debt will have to be paid in full before obtaining an FHA loan.

I want to be Your Broker!

 Did you know that my services cost you nothing? It would be well worth your time to investigate the differences in the types of Realtor’s services. The laws are very specific, but most people just aren’t aware of these differences. Think about it! What if your dog bit your neighbor’s child and he/she sued you. Would you go to their attorney to represent you? Of course not. You would get your own representation. Then why would you go to the listing agent and expect him/her to represent you in a real estate transaction? It just can’t be done. They have already signed a listing contract with that seller. The law allows agents to represent both sides – but at whose expense? Find out for yourself!  Learn the value of having your own personal Exclusive Buyer’s Agent, who is on YOUR SIDE – 100%. 

FHA Loan Limits

Article about the newly increased FHA loan limits, guidelines, qualification, etc.

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