What is the maximum loan-to-value (LTV) ratio typically permissible for FHA loans?

The maximum loan-to-value (LTV) ratio permissible for FHA loans is 96.5%. This means that borrowers can finance up to 96.5% of the home's appraised value or purchase price, whichever is lower. This high LTV ratio makes FHA loans especially attractive for first-time homebuyers or those with less-than-perfect credit, as it allows them to make a smaller down payment—typically around 3.5%. The FHA's purpose is to enhance access to homeownership, and the favorable LTV ratio reflects that goal by making it easier for potential buyers to qualify for a mortgage with minimal upfront costs.

Other options, such as 80%, 90%, and 100%, provide lower or unrealistic financing levels for typical FHA loans. FHA loans, with their 96.5% LTV, are designed to be more accommodating, supporting borrowers who may not have substantial savings for a larger down payment.