An FHA Higher-Priced Mortgage Loan (HPML) is a first-lien mortgage with an Annual Percentage Rate (APR) that exceeds the Average Prime Offer Rate (APOR) by 1.5 percentage points or more. These loans trigger stricter CFPB regulations, specifically requiring mandatory escrow accounts for property taxes and homeowner's insurance.
Your mortgage will be considered a higher-priced mortgage loan (HPML) if the APR is a certain percentage higher than the APOR, depending on what type of loan you have: First-lien mortgages: If your mortgage is a first-lien mortgage, the lender of this mortgage will be the first to be paid if you go into foreclosure.
2025 FHA Loan Limits PA is $524,225 and goes up to $1,209,750 for high-cost counties for one-unit properties. 2025 FHA Loan Limits For Pennsylvania for 2-unit properties is $671,200 and goes up to $1,548,975 for high-cost counties.
Many customers ask us if FHA loans have mortgage insurance which they often call "PMI," which stands for private mortgage insurance. You are required to pay mortgage insurance on FHA loans, but the mortgage insurance on these loans is called a mortgage insurance premium (MIP), not PMI.
From January 1, 2025, through December 31, 2025, the threshold amount is $33,500. xiii. From January 1, 2026, through December 31, 2026, the threshold amount is $34,200.
Higher Priced Mortgage Loans* (HPML) Property Flip Transactions. HPML* New Construction Properties with any title transfer within 180 days prior to the sales contract date, or any title transfer after the sales contract date, including land-only and zero value title transfers, require a Second Full Appraisal.
If your home's value increases or you've paid down a significant portion of your mortgage, refinancing into a new conventional loan can eliminate PMI or remove FHA insurance entirely. Many homeowners with FHA loans choose to refinance once they reach 20% equity, since FHA insurance can't usually be canceled otherwise.
The federal government insures FHA loans issued by private lenders, such as banks. FHA borrowers must pay two types of mortgage insurance premiums (MIPs)—one upfront and the other monthly. Due to FHA insurance, banks are more willing to lend to homebuyers with low credit scores and small down payments.
The FHA 85% rule refers to a past guideline for cash-out refinances limiting the loan to 85% Loan-to-Value (LTV) and a specific rule for identity-of-interest transactions (like buying from family) where borrowers couldn't finance more than 85% of the home's value unless exceptions applied, such as renting from the family member for at least six months prior. While the general cash-out LTV is now 80%, the 85% rule still applies to certain related-party sales, requiring a 15% down payment unless an exception is met, notes FHA.com.
FHA Purchase Loan LTV Rules
For an FHA home loan to purchase a home, the FHA sets a maximum LTV of 96.5 percent, which means a 3.5 percent minimum down payment requirement. According to FHA loan guidelines, a borrower must have a credit score of at least 580 to be eligible for this financing.
In most of the United States, the 2025 CLL value for one-unit properties will be $806,500, an increase of $39,950 (or 5.2 percent) from 2024. The Housing and Economic Recovery Act (HERA) requires FHFA to adjust the Enterprises' baseline CLL value each year to reflect the change in the average U.S. home price.
A $400,000 mortgage at a 7% interest rate results in roughly $2,661/month for a 30-year loan and about $3,595/month for a 15-year loan, covering principal and interest, but doesn't include taxes, insurance, or PMI, which add hundreds more to the total monthly cost. The total interest paid over the life of a 30-year loan could exceed $550,000, making the overall cost close to $1 million.
Along with the flood regulations, High Priced Mortgage Loans are the only time that the regulations require a bank to escrow for a loan.
The FHA "12-month rule" generally requires borrowers to have a solid payment history, ideally with 12 consecutive months of on-time payments for all debts, especially housing, before applying for a loan, though some exceptions allow for limited late payments (like two 30-day lates in 24 months) or manual underwriting for extenuating circumstances. If a borrower has significant late payments (e.g., 3+ 30-day lates, or a 90-day late) within the past year, the loan may need to be downgraded or manually underwritten to assess if it was due to disregard for finances or extenuating situations like job loss or disability, requiring more documentation.
FHA loan disqualifications often stem from poor credit (below 500), high debt-to-income (DTI) ratios (often above 43%), unstable employment, insufficient funds for down payment/closing costs, or issues with the property itself, like hazards or severe disrepair, plus owing back federal debts or having delinquent student loans. Clearing federal debt, establishing stable income, and ensuring the home meets safety standards are key to overcoming these hurdles, notes FHA.com and The Home Loan Expert.
No matter how much you borrow with an FHA loan, the upfront mortgage insurance premium totals 1.75 percent of that amount. You can pay this premium all at once at closing or add it to your mortgage and pay it over time. If you choose the latter, you'll pay interest on this cost, adding to your overall expense.
The 80% rule in homeowners insurance requires you to insure your home for at least 80% of its total replacement cost to receive full coverage for partial losses, preventing underinsurance and significant out-of-pocket costs if damaged; if you fall below this threshold, your insurer pays a proportionate amount of the claim, not the full repair cost. This rule ensures you can rebuild, factoring in current material and labor costs, but excludes land value.
Regulation Z defines an HPML as a mortgage secured by a borrower's principal dwelling with an APR that is at least 1.5% higher (for a first lien) or at least 3.5% higher (for a second lien) than the average prime offer rate (APOR) for a comparable transaction as of the rate lock date.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
Choose a Second Mortgage if: You prefer predictable payments and need a lump sum for a specific purpose, such as consolidating high-interest debt or funding a major purchase. Choose a HELOC if: You value flexibility and want the ability to borrow as needed for ongoing expenses or home improvements.