Base Loan Amount
Definition and meaning of Base Loan Amount in real estate.
The base loan amount is the primary principal sum of a mortgage before any additional financed fees, such as mortgage insurance premiums or closing costs, are added to the loan balance.
In more detail
Lenders use this figure to calculate the basic monthly principal and interest payments for the borrower. When applying for loans like FHA or VA mortgages, borrowers are often allowed to roll upfront fees into the total loan amount. Adding these financed fees creates the total loan amount, which is larger than the base loan amount.
Loan-to-value ratios and loan limits set by government agencies are typically calculated using the base loan amount rather than the final financed total.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Excludes | Financed closing costs and upfront insurance premiums |
| Used for | Determining loan-to-value ratios and conforming loan limits |
| Applies to | FHA, VA, and conventional mortgages |
A home buyer obtains a mortgage where the base loan amount covers the purchase price, and the upfront mortgage insurance premium is financed and added to the final loan balance.
Frequently asked questions
What is the difference between the base loan amount and the total loan amount?
The base loan amount is the initial amount borrowed to buy the home, whereas the total loan amount includes any upfront fees, funding fees, or closing costs that have been financed into the mortgage.
Are interest rates calculated on the base loan amount?
No, interest is calculated on the total loan amount, which represents the entire balance that the borrower owes the lender.