Another year, another increase in FHA loan limits, thanks to yet another rise in home prices.
This is good news if you’re thinking about taking out an FHA loan, as you’ll likely be able to borrow a little bit more without going over the maximum loan amount allowed.
Like Fannie Mae and Freddie Mac, the FHA has a maximum loan amount, which varies based on whether the property resides in a low-cost or high-cost area of the country.
Where home prices are generally cheaper, the “floor” is imposed. And in areas where home prices are more expensive, loan limits between the floor and “ceiling” are put in place.
This is all driven by median home prices, which change from year to year.
These loan limits are key to determine if you’re eligible for an FHA loan, or if you’ll need to seek conventional loan financing instead.
If the home you have your eye on is particularly expensive, you might not be able to get an FHA loan, depending on loan limits in your city.
This is because the FHA floor is significantly lower than the conforming loan limit, just 65 percent of the new higher max loan amount of $510,400 for a one-unit property.
You Can Now Take Out an FHA Loan for $331,760
- One-unit property: $331,760
- Two-unit property: $424,800
- Three-unit property: $513,450
- Four-unit property: $638,100
Effective for case numbers assigned on or after January 1, 2020, you’ll be able to take out an FHA loan as large as $331,760. The loan limits are even higher for multi-unit properties, as seen above.
This is up from $314,827, which is roughly a five percent increase. For someone living in a city where the floor loan limit is imposed, it means they can purchase a home valued at about $344,000 with 3.5% down.
That compares to a home purchase of roughly $326,000 in 2019 with 3.5% down payment. It could matter to home buyers in certain parts of the country.
While $331,760 is the lowest FHA loan limit in 2020, hundreds of cities nationwide will enjoy higher loan limits, between the floor and the ceiling.
For example, $644,000 in Boulder, CO, $362,250 in Flagstaff, $345,000 in Las Vegas, $373,750 in Miami, and $569,250 in Sacramento, just to name a handful.
You can look up your city here to see what loan limit is imposed in your area of interest.
Interestingly, there were 11 jurisdictions that saw their loan limits fall from 2019 to 2020, including Dallas, Minneapolis, Nashville, Newark, and Richmond, VA.
2020 FHA High-Cost Loan Limits Rise to $765,600
- One-unit property: $765,600
- Two-unit property: $980,325
- Three-unit property: $1,184,925
- Four-unit property: $1,472,550
When it comes to the FHA’s ceiling, loan limits match those of Fannie and Freddie, and as such will be up to $765,600 in 2020. And even higher for duplexes, triplexes, and fourplexes.
The ceiling is up from $726,525 in 2019, which should help more homeowners stay in the FHA’s home loan program in high-cost regions of the country.
There are roughly 100 metros nationwide at the ceiling, including the District of Columbia, Jackson, WY-ID, Los Angeles, San Francisco, and Heber, Utah.
Even higher loan limits apply to so-called “special exception areas” of Alaska, Hawaii, Guam, and the Virgin Islands to account for more expensive construction costs.
Those limits, which are set at 150 percent of the FHA’s high-cost mortgage limits, are as follows:
- One-unit property: $1,148,400
- Two-unit property: $1,470,475
- Three-unit property: $1,777,375
- Four-unit property: $2,208,825
However, more populous metros like Anchorage max out at $411,700, and Maui only goes up to $690,000.
When comparing FHA loans to conventional loans, be sure to consider max loan limits, which may dictate your decision.
(photo: Marco Verch)