The 2026 limit, and the ground it covers
Chester County sits inside HUD’s Philadelphia metro area for loan limits. The 2026 one-unit figure published for that area is $630,200, with $806,750 for two units, $975,200 for three and $1,211,950 for four. HUD is the authority on its own limits, so treat those as the published figures and have the lender confirm them on HUD’s lookup for your case number before anyone writes an offer.
Against July 2026 sold medians, $630,200 reaches a long way west and south. It clears the Coatesville area at $369,450, the Oxford area at $539,000 and Downingtown at $589,500, all Movoto sold medians for July 2026, each covering a whole postal area around the borough. It runs out around Kennett Square at $700,000 and Malvern at $825,000, where a conventional loan takes over to $832,750.
Down payment, score and the ratios
A decision score of 580 or better gets 3.5% down. Between 500 and 579 the requirement is 10%. Below 500 there is no FHA loan. Lenders add their own floors above HUD’s, frequently in the 600 to 640 range.
Debt-to-income runs 31% for housing and 43% overall on a manually underwritten file, and stretches with compensating factors or a strong automated approval. On a house at the Oxford-area median of $539,000, 3.5% is $18,865 down, and your customary half of the 2% realty transfer tax is another $5,390 (chesco.org, read August 2026). The tax gets forgotten until the settlement sheet arrives.
Two premiums, and how long each one runs
FHA charges two premiums. The upfront premium is 1.75% of the loan amount and is normally financed into the balance, so on a $520,000 loan it adds $9,100. The annual premium is billed monthly and depends on the down payment.
| Down payment | Annual premium | How long it runs |
|---|---|---|
| Under 5% | 0.55% | Life of the loan |
| 5% to under 10% | 0.50% | Life of the loan |
| 10% or more | 0.50% | 11 years |
These rates have held since 2023 (hud.gov, Mortgagee Letter 2023-05). Loans above a threshold HUD indexes each year pay 0.20 points more in each tier, so ask the lender where that line falls for your file. Because the premium at 3.5% down never falls off by itself, the long game is usually a refinance once there is 20% equity.
What the appraiser writes up on a borough house
FHA appraisals have a personality, and the older boroughs give them material. Coatesville’s historic district holds 457 contributing buildings, most of them built between 1850 and 1924. Oxford’s holds 517, mostly 1870 to 1910, Queen Anne and Italianate. Downingtown was settled in 1716 and incorporated in 1859, and the grid still has the Victorians and early-1900s twins to prove it.
All of that is pre-1978, which puts the lead paint rules in play. The recurring flags:
- Peeling or chipping paint anywhere on a pre-1978 house, inside or out, basement sashes included.
- Missing or loose handrails, which on a three-story twin means most of the staircase.
- A roof at the end of its life, and any water finding its way into a stone foundation.
- Exposed wiring, open junction boxes, live knob-and-tube.
- A furnace that will not fire, a water heater with no relief valve, broken glazing.
Repairs happen before closing or through an escrow the lender sets up, and which side of the table pays for them is a term of the agreement of sale. Where the work is bigger than that, ask about a 203(k) instead.
The well, and who is allowed to draw the sample
South and west of the Route 30 corridor, the well is usually what the file waits on. HUD requires an existing well to deliver at least 3 gallons a minute continuously, and a new-construction well 5 gallons a minute continuously across at least four hours. A water test is required on new construction, where the appraiser reports a deficiency, where the water is known or reported to be unsafe, and where the property sits near a dump, a landfill, an industrial site or a farm (HUD Handbook 4000.1, last revised 8/12/2026).
Who takes the sample is a rule in its own right. All testing, collection and transport must be done by a disinterested third party, which HUD lists as the local health authority, a commercial testing laboratory, a licensed sanitary engineer or another party the local health authority accepts. The borrower, the owner and any other interested party are barred from collecting or carrying it.
Some water sources end the conversation. A property served by a spring, a lake, a river, a sand-point well or an artesian well, or one whose supply runs through a mechanical chlorinator, is not eligible for FHA insurance at all.
Distances, and whose rule wins
HUD’s baseline for existing construction is 10 feet from the property line, 50 feet from a septic tank and 100 feet from the drain field, with the drain field reducible to 75 feet where the local authority allows it. HUD then defers to local requirements wherever they are stricter, and in Chester County they are.
The county health department’s Rules and Regulations, Chapter 500, require a county permit to drill any well, licensed county contractors to do it, and 100 feet from subsurface and surface sewage absorption areas, cesspools and seepage pits, with 50 feet from septic, aerobic, pump and holding tanks. Sampling is limited to a state-certified laboratory employee or a county-licensed well driller or pump installer. So the 75-foot reduction is not on the table here, and the county already forbids owner-collected samples. Confirm the current text with the health department, since these rules get amended. More in the wells and septic guide.