FHA Single Family Housing Policy Handbook 4000.1, Part II — g. Disbursement Limits (04/29/2024)

FHA Single Family Housing Policy Handbook 4000.1, Part II — g. Disbursement Limits (04/29/2024)

g. Disbursement Limits (04/29/2024) i. Definitions First 12-Month Disbursement Period refers to the period beginning on the day of closing and ending on the day before the anniversary date of closing. When the day before the anniversary date of closing falls on a federally observed holiday, Saturday, or Sunday, the end period will be on the next business day. Initial Disbursement Limit refers to the maximum amount of funds that can be advanced to the Borrower of an adjustable rate HECM at closing and during the First 12-Month Disbursement Period. Borrower’s Advance refers to the funds advanced to the Borrower at the closing of a fixed rate HECM. Net Principal Limit (NPL) refers to the amount of HECM funds available to, or to be paid on behalf of, the Borrower after deducting all fees and charges that are required as a condition of the Mortgage and prior disbursements from the Principal Limit. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 3. Allowable Mortgage Parameters Handbook 4000.1 597 Last Revised: 11/26/2025 Mandatory Obligations refer to fees and/or charges incurred in connection with the origination of the HECM that are requirements for loan approval and which will be paid at closing or during the First 12-Month Disbursement Period. ii. Standard The Mortgagee must determine the Borrower’s Initial Disbursement Limit or Borrower’s Advance at closing. The Initial Disbursement Limit, Borrower’s Advance, or the amount disbursed to the Borrower at any point in time may not exceed the Principal Limit. The following items must be included in the Initial Disbursement Limit and Borrower’s Advance. Adjustable rate HECMs must include: • the amount of Mandatory Obligations; • the amount disbursed to the Borrower at closing; and • the amount of the available Initial Disbursement Limit not taken by the Borrower at closing. Fixed rate HECMs must include: • the amount of Mandatory Obligations; and • the amount disbursed to the Borrower at closing. (A) Initial Disbursement Limit Calculation The Initial Disbursement Limit during the First 12-Month Disbursement Period is the lesser of (1) or (2) below: 1. the greater of: • 60 percent of the Principal Limit; or • the sum of Mandatory Obligations plus 10 percent of the Principal Limit, if applicable; or 2. the Principal Limit less the sum of the funds in the Life Expectancy Set-Aside (LESA) for payment beyond the First 12-Month Disbursement Period and the Servicing Fee Set-Aside. The Borrower must notify the Mortgagee of the amount of the additional percentage of the Principal Limit beyond Mandatory Obligations that will be drawn or the amount that will remain available to be drawn during the First 12-Month Disbursement Period. The Borrower may not increase or decrease this election after closing. (B) Borrower’s Advance Calculation The Mortgagee must determine the Borrower’s Advance at closing. The Borrower’s Advance must not exceed the lesser of (1) or (2) below: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages 3. Allowable Mortgage Parameters Handbook 4000.1 598 Last Revised: 11/26/2025 1. the greater of: • 60 percent of the Principal Limit; or • the sum of Mandatory Obligations plus 10 percent of the Principal Limit, if applicable; or 2. the Principal Limit less the sum of the funds in the LESA for payment beyond the First 12-Month Disbursement Period and the Servicing Fee Set-Aside. The Borrower must notify the Mortgagee of the amount of the additional percentage of the Principal Limit beyond Mandatory Obligations that will be drawn. iii. Eligibility for an Additional 10 Percent of the Principal Limit The Borrower is eligible for up to an additional 10 percent of the Principal Limit when Mandatory Obligations exceed 50 percent of the Principal Limit. The Borrower must notify the Mortgagee of the amount of the additional 10 percent of the Principal Limit that they intend to draw at the time of closing or during the First 12-Month Disbursement Period. iv. Net Principal Limit Calculation The Mortgagee must determine the NPL by subtracting from the Principal Limit any initial payments to or on behalf of the Borrower, such as the IMIP, closing costs, or cash payment to the Borrower, and if applicable, any funds set aside from the Principal Limit for monthly servicing fees, repairs to be completed after closing, a LESA, or first-year Property Charges.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part II — g. Disbursement Limits (04/29/2024) · source URL · snapshot 8c03836f77f317e1