Maximum Mortgages
for Purchase Transactions

Information by State  Print version

Chapter 2
Mortgage Credit Guidelines
Page 2-18

The property's sales price (or appraised value, if less) exclusive of any borrower-paid closing costs will be multiplied by the "maximum loan-to-value percentages" as shown HUD Handbook: 4155.1 Page 1-7A. This determines the maximum mortgage amount provided the borrower makes their required cash investment of at least 3%, which may include borrower-paid allowable closing costs.

The minimum cash investment will be based upon the sales price without considering closing costs. Closing costs, while not included in calculating the 3% cash investment may be included in satisfying that minimum requirement. Keeping in mind that if the borrower pays little or no closing costs, the loan amount must be adjusted to ensure that the 3% minimum cash investment is met.

Sellers or other third parties such as real estate agents, builders, developers, etc. or any combination of parties can contribute up to 6% of the property's sale price towards the buyer's actual allowable closing costs, prepaid expenses, discount points and other costs. Closing costs that are normally paid by the borrower would be considered contributions when paid by the seller or other associated party. Furthermore, if any of the allowable closing costs are paid by the seller or other interested parties, they cannot be included as part of the borrower's statutory 3% minimum required investment.