FHA Loan Requirements, Guidelines and Application Tips
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2023 FHA Loan Limits in Montana

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If you’d like to purchase a home in Big Sky Country, a mortgage backed by the Federal Housing Administration (FHA) could help. FHA loans have more flexible requirements than conventional loans, allowing lower credit scores and higher debt amounts. They do limit how much you can borrow, though. For 2023, you can borrow up to $472,030 in most of Montana and in six counties you can borrow more — up to $703,800 in Gallatin.

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Montana FHA loan limits by county

County nameOne familyTwo familyThree familyFour familyMedian sale price
BIG HORN$472,030$604,400$730,525$907,900$205,000
DEER LODGE$472,030$604,400$730,525$907,900$206,000
GOLDEN VALLEY$472,030$604,400$730,525$907,900$174,000
JUDITH BASIN$472,030$604,400$730,525$907,900$219,000
LEWIS AND CLARK$472,030$604,400$730,525$907,900$396,000
POWDER RIVER$472,030$604,400$730,525$907,900$53,000
SILVER BOW$472,030$604,400$730,525$907,900$250,000
SWEET GRASS$472,030$604,400$730,525$907,900$347,000

How are FHA loan limits determined?

To protect both homebuyers and lenders from taking on more debt than they can afford, the Federal Housing Finance Agency (FHFA) sets the “conforming loan limit” every year based on the national average home sales price in the year before.

The Department of Housing and Urban Development (HUD) then uses that number as a base to determine the highest and lowest maximum amounts the FHA is allowed to finance. In the highest-cost areas of the nation, the top loan limit is 150% of the conforming loan limit. In the lowest-cost areas, it’s 65%.

Almost all Montana counties qualify for the lowest FHA loan limit, $472,030 for a one-unit home. If you’re in the market for a multifamily home, the low-cost limits increase with each unit, as you can see in the table above. The counties of Broadwater, Ravalli, Park, Missoula, Flathead and Gallatin, however, all have an elevated limit, with Gallatin having the highest at $703,800.

How to qualify for an FHA loan in Montana

You don’t need to meet income requirements to qualify for an FHA loan, but you will need:

A 500 to 580 credit score. On an FHA loan, your credit score can be as low as 500. However, many lenders still strongly prefer a score of 580, which is the tipping point on the down payment requirement.

A down payment of 3.5% to 10%. If your credit score is 500 to 579, you’ll need a 10% down payment. If it’s 580 or higher, the minimum down payment requirement is only 3.5%.

A debt-to-income (DTI) ratio of 43% to 50%, max. Lenders calculate your ability to pay back your mortgage by looking at how much you already have to pay each month towards your debts. If half of your income is already going towards paying down debt (a 50% DTI), lenders might worry whether you’ll have enough cash to cover a mortgage payment. Some FHA lenders allow exceptions as high as 50%, but most set a maximum of 43% DTI.

Types of mortgage insurance. In an FHA loan, you must pay two kinds of mortgage insurance: an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP). The first is a fee that’s 1.75% of the loan amount and is rolled into your loan. The second ranges from 0.15% to 0.75% of the loan amount and is added to your monthly payment. While your down payment can reduce how much you pay, you’ll still have to have both types, regardless of your down payment amount.

An FHA loan appraisal. An FHA appraisal is different from an appraisal for a conventional loan. It’s more expensive, as the appraiser will be judging the house by FHA standards to ensure the home is safe.

Primary occupancy. FHA loans can only be used to purchase primary residences — you must live in your home for at least 12 months after you close on the loan. You can’t use one to buy a second home or any investment property that you won’t live in.

Buying a multifamily property with an FHA loan

There is a loophole regarding getting investment property with an FHA loan. You could purchase a multifamily home that has up to four units. As long as you live in one of the units, you can rent out the other units. The rental income from the other units could even give you a leg up and cover your mortgage payment on the whole building.

FHA loan requirements such as credit score, down payment, DTI and mortgage insurance stay the same. To afford the larger space, though, you’ll be able to borrow a higher amount. In most counties, the 2023 multifamily loan limits are:

  • $604,400 for two units
  • $730,525 for three units
  • $907,900 for four units

FHA lenders in Montana

Lender nameLT ratingMinimum FHA credit score
PennyMac5 stars580
Rocket Mortgage5 stars580
PenFed Mortgage3 stars620
Guild Mortgage3 stars540

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