We know you’re excited about the prospects of owning your first home.
But before you start browsing listings and filling out FHA loan applications, you should first find out the loan limit for your desired home location.
Why? Because that helps you know the type of house you can choose, and how much potential down payment you are likely to pay.
In fact, the amount you can borrow is limited by the FHA loan limit.
So how do you know the FHA loan limit in your desired location? Don’t worry.
In this article, we’ll dive into the nitty-gritties of FHA loan limits, explaining how they’re calculated and the factors that impact them.
We’ll also help you understand how the limit affects your home-buying plans. So, if you’re ready to take the next step towards homeownership, join us as we explore the world of FHA loan limits.
FHA loan limits refer to the maximum amount borrowed under the FHA’s mortgage insurance program. The FHA loan limit varies by location and is based on the median home prices in the area and is typically adjusted annually.
In areas where housing prices are higher, the FHA loan limit will be higher, while in areas where housing prices are lower, the FHA loan limit will be lower. The same applies to the FHA 203k loans if you’re looking to combine the price of a house with the renovations of the house into a single mortgage.
FHA loan limits are calculated using a formula that takes into account the conforming loan limit set by the FHFA (Federal Housing Finance Agency). This is the maximum loan amount that can be purchased or guaranteed by Fannie Mae and Freddie Mac.
These loan limits are important and affect the amount of money you can get through an FHA loan. If you need more than the FHA loan limit, consider alternative loan options or come up with a larger down payment to make up the difference.
It’s worth noting that the FHA loan limit is only one factor determining the amount of money you can receive through an FHA loan.
Other factors, like your credit score, debt-to-income ratio, and the property’s appraised value, will also play a role in determining the loan amount.
The FHA forward mortgage limit “floor” and “ceiling” for a one-unit property in CY 2024 are $472,030 and $1,089,300, respectively.
But, there are certain high-cost areas, some of which we serve, such as parts of California and Hawaii, where the loan limits are higher.
Some of the FHA loan requirements that affect loan limits include:
- Credit score: Your credit score can also impact the maximum FHA loan amount. While FHA loans are generally more lenient than conventional loans regarding credit score requirements, a higher credit score can increase the amount you can borrow.
- Debt-to-income ratio: The maximum loan amount for an FHA loan can also be affected by your debt-to-income ratio (DTI). FHA loans typically require a DTI of at most 43%, although some lenders may allow for higher ratios under certain circumstances.
- Down payment: Your down payment can also affect the maximum loan amount for an FHA loan. While FHA loans require a minimum down payment of 3.5%, a larger down payment can increase the amount you can borrow.
- Property Location: Your maximum FHA loan amount varies depending on the county in which the property is located. The Department of Housing and Urban Development (HUD) sets loan limits for each county based on the average home prices in the area.
- Property type: The maximum amount for an FHA loan also depends on the type of property being purchased. For example, the loan limit is typically higher for a multi-unit property (up to four units) than for a single-family home.
FHA loans vary based on two different factors. Let’s explore them.
The FHA loan limit varies depending on whether you’re looking to buy a home in a rural or urban area.
- For rural areas, the FHA loan limits are generally lower than those in urban areas, reflecting the lower cost of living in these regions.
- In contrast, FHA loan limits in urban areas tend to be higher due to the higher cost of living, particularly in cities with high property values.
Be sure to check the FHA loan limit for the specific area you’re considering to ensure you’re within the limit.
- Single-family home: the FHA loan limit for 2024 ranges from $472,030 to $1,089,300, depending on the property’s location. These limits are based on the median home prices in the area and are adjusted annually to reflect changes in the market.
- Duplex: the FHA loan limit is higher than that of a single-family home because a duplex is more expensive. The limit for a duplex range from $604,400 to $1,394,775, depending on the property’s location.
- Triplex: the FHA loan limit is even higher because a triplex property is usually more expensive. The limit for a triplex range from $730,525 to $2,095,200, depending on the property’s location.
Here’s a summary of the minimum and maximum FHA loan limits for low and high-cost areas in 2024.
|Minimum FHA Loan Limit
|Maximum FHA Loan Limit
FHA loan limits are the maximum loan amount you can get via an FHA-insured loan. The limits vary by region and are based on the median home prices in each area. In general, areas with higher median home prices will have higher FHA loan limits, while areas with lower median home prices will have lower limits.
The FHA loan limit is also influenced by the type of property being purchased or refinanced. For instance, the maximum loan limit for a single-family home is lower than that of a duplex or a triplex. Similarly, the limit for a home in a high-cost area is higher than that of a home in a standard area.
It’s important to note that FHA loan limits are subject to change each year. The Department of Housing and Urban Development (HUD) publishes new loan limits annually, which reflect changes in median home prices. These updates ensure that FHA loan limits keep pace with the changing housing market.
As of now, it’s unclear whether FHA will increase loan limits for 2024 or not. However, it’s important to note that the agency reviews its loan limits yearly to ensure they align with the current housing market conditions.
Any changes to the loan limits are usually announced towards the end of the year. In the past, FHA has increased loan limits in response to rising home prices and demand for affordable housing. So, the FHA may increase loan limits in 2024 if market conditions warrant it.
Sellers may be hesitant to accept offers with FHA loans because of:
- Appraisal requirements: One of the main reasons that sellers may not like FHA loans is that they require a more stringent appraisal process than conventional loans. FHA appraisals have stricter requirements regarding property condition and safety. This is inconvenient because it can result in delays and extra costs for sellers, who may have to make repairs or lower the price of the home to accommodate the FHA appraisal.
- Longer closing times: FHA loans often take longer to close than conventional loans. This is because the underwriting process for FHA loans is more involved, and there may be additional documentation requirements.
- Perception of risk: Some sellers may view FHA loans as riskier than conventional loans due to the lower credit score and down payment requirements. They may be concerned that you’re not as financially stable or committed to the home purchase, which could result in the sale falling.
In conclusion, an FHA loan limit is the maximum amount of money a borrower can receive when taking out an FHA-insured loan. Knowing the FHA loan limit can help determine how much you can afford to borrow and what type of property you can buy.
If you’d like further assistance with FHA loan limits in your area, feel free to contact us. We’ll help you determine your loan limit and the property you can buy.