What is the maximum loan-to-value ratio for FHA loans?

The maximum loan-to-value (LTV) ratio for FHA loans is 96.5%. This means that a borrower can finance up to 96.5% of the property's appraised value or purchase price, whichever is lower, allowing for a relatively small down payment of 3.5%. This feature of FHA loans makes them particularly attractive for first-time homebuyers or those with limited funds for a down payment, as it reduces the amount of cash needed upfront.

By enabling higher LTV ratios, FHA loans facilitate access to home financing for individuals who may not qualify for conventional loans that typically require larger down payments. The higher LTV also reflects the FHA's mission to promote home ownership among a broader segment of the population.