Summary: The maximum FHA loan amount for Washington State varies by county. For most counties, the 2017 maximum loan size is $275,665. In the Seattle metro area, it’s set at $592,250 due to higher home prices.
The Federal Housing Administration’s mortgage program is a popular financing method for home buyers, especially those who are buying their first home. But there are limits to how much you can borrow when using this program. Here’s what you should know about the maximum FHA loan amount in Washington State, as of 2017.
How the FHA Program Works
The FHA does not lend money directly to borrowers. Under this program, the actual funding comes from a mortgage lender in the private sector. The FHA merely insures the loan, giving the lender some degree of protection against borrower default.
This program is particularly popular among home buyers with limited funds saved for a down payment. That’s because it allows eligible borrowers to make a down payment as low as 3.5% of the purchase price or appraised value.
Maximum Loan Amount for Washington State
So how is the maximum FHA loan amount determined? As a borrower, you might actually encounter two limits. The first is the countywide limit imposed by the Department of Housing and Urban Development (HUD). The mortgage lender may also determine a maximum loan amount, based on your current income and debt situation. Depending on the situation, these might be two different numbers.
The maximum FHA loan amount for most of Washington State is $275,665. That’s for a single-family home purchase. There are higher caps for multifamily properties such as duplexes and triplexes. In the Seattle metro counties of King, Pierce and Snohomish, where home prices are generally higher, the maximum FHA loan amount is $592,250 for 2017. And then there are other counties that fall somewhere in between.
Note: These limits went up from 2016 to 2017. You might still find resources online that list the maximum FHA loan amounts from last year, which are now inaccurate. So you’ll want to make sure you’re looking at information for the current calendar, as provided in the link above.
Borrowing More Than the Limit
There’s an important distinction between the sales price of the house you’re buying, and the amount you need to borrow from a lender. You can buy a home that exceeds the maximum FHA loan amount for your Washington county, as long as the amount being borrowed falls within the size limits mentioned above.
The minimum required down payment for an FHA loan is 3.5% of the purchase price or the appraised value, whichever is less. If you buy a home that is significantly higher than the maximum FHA loan amount, you might have to put down more than 3.5% minimum. (If you have questions about any of this, please contact us.)
Loan limits represent the official maximum FHA mortgage amount, according to HUD. But the amount you can actually borrow will largely depend on your current income and debt level.
Mortgage lenders use debt-to-income (DTI) ratios to evaluate a person’s ability to take on additional debt, such as an FHA loan. It’s a financial safeguard designed to protect borrowers and lenders alike. As its name suggests, a debt-to-income ratio compares the amount you earn each month to the amount spend on recurring debts.
Generally speaking, FHA prefers borrowers to have a total debt-to-income ratio no higher than 43%. So your combined monthly debts (including the mortgage payment) should not use more than 43% of your gross monthly income. But there are exceptions to this general rule, especially when the new loan only results in a slight increase in total housing costs.
Let’s talk: Would you like to know the maximum FHA loan amount you qualify for? Contact our staff for help. We can review your financial situation and let you know how much you’re able to borrow.