Various loan programs in Utah have their own internal guidelines that lenders and banks follow. Most of these guidelines are similar from one program to another and follow the same basic documentation process. For example, lenders are required to determine affordability and they do so by comparing your monthly credit obligations, including your mortgage payment, with gross monthly income.
Income is documented by providing the lender with your most recent pay check stubs covering a 30 day period. Or, if you’re self-employed, you’ll be asked to submit copies of your last two years of federal income tax returns. This process is pretty much the same for all loan programs that require a full documentation regardless of where the property is located.
Mortgage loan programs also have their own individual loan limits as well. For example, in Utah and most parts of the country a conventional loan limit is $484,350, referred to as a “conforming” loan. In higher cost counties like Tooele and Summit, around Salt Lake City, these limit can increase based on the higher median home values in the area compared to the national average. Jumbo loans are those mortgages where the amount is higher than the local conforming maximum.
Jumbo loan limits are generally based on the amount of down payment. For example, a low down payment jumbo loan might ask for a 5% down payment and cap the loan amount at $2.0 million or with a 10% down payment, the limit can be $3.0 million. Read more about the differences between Jumbo and Conforming loans. But this applies to all regular loans, not government-backed programs like FHA, USDA, and VA. How are the loan limits set for government-backed home loans?
VA Loan Limits:
VA limits follow the conforming product, at $484,350 and just like the conventional program can be higher based upon the median value of homes in the area. VA also offers special high balance VA Jumbo loans, for higher loan amounts up to $1.5mil. These VA jumbo loans are not 100% financing and will require a small down payment.
USDA Loan Limits:
USDA Rural Housing limits are simply based upon debt to income and household income limits. USDA household income limits can depend on many variables, but the borrower’s gross monthly income cannot exceed 115% of the median income for the area. Read more USDA income limits here
FHA maximum loan amounts are set county-by-county are tied to the conforming conventional loan limits set by Fannie Mae and Freddie Mac and is set at 65% of the conforming limit, or $275,665. In high-cost areas, where the median home values are higher than the national average, the limit is at 150% of the conforming loan limit, or as high as $636,150. Please see the Utah FHA loan limit chart below.
Yet even though an FHA loan limit is capped at $410,550 in Wasatch County doesn’t automatically mean the borrowers will be approved for that limit. Instead, loan amounts are based on affordability and debt to income caps, the loan limit only means that’s how high a loan can be and still be considered an FHA eligible. If a lender approves an FHA loan application and doesn’t use proper FHA underwriting protocol, the loan won’t be sellable in the secondary market. Lenders apply these guidelines when evaluating a loan application to make sure the loan is eligible for sale. Doing so replenishes a lender’s line of credit which allows the lender to make still more loans.
Let’s say there is a home listed at $390,000 and the borrowers want to use the FHA loan program due to the small down payment requirement of 3.5%. In this example, the down payment is $13,650 leaving a loan amount of $381,135 before adding in the FHA mortgage insurance premium. The property is located in a county with a maximum FHA loan limit is $362,750 which is just above the initial loan amount. Yet FHA loans also require mortgage insurance and the upfront premium is 1.75% of the initial loan amount, or $6,673 making the final loan amount $387,800, higher than what FHA allows in this county. The borrowers must then decide to put more money down or find a less expensive home that will keep the FHA loan at or under the maximum.
FHA loan limits are adjusted annually based on the median home values in the county where the property is located. As property values rise, so too can the FHA loan limit increase. These values are reviewed in the fall of each year and compare the average home price from the previous year to the current one. If there is an increase, the new loan limits will take effect January 1 of the following year.
Current Utah FHA Loan Limits:
|BOX ELDER||OGDEN-CLEARFIELD, UT||389,850||499,050||603,250||749,700|
|IRON||CEDAR CITY, UT||275,665||352,950||426,625||530,150|
|SALT LAKE||SALT LAKE CITY, UT||328,900||421,050||508,950||632,500|
|SUMMIT||SUMMIT PARK, UT||636,150||814,500||984,525||1,223,475|
|TOOELE||SALT LAKE CITY, UT||328,900||421,050||508,950||632,500|
|UTAH||PROVO -OREM, UT||324,300||415,150||501,800||623,650|
|WASHINGTON||ST. GEORGE, UT||302,450||387,200||468,000||581,650|
One-Family is a single family home or condominium
Two-Family is two separate living units (duplex)
Three-Family three separate living units (triplex)
Four-Family four separate living units (fourplex)