In a NutshellFHA loans can help people who need a smaller down payment and more flexible credit approval standards than conventional mortgage loans offer. But FHA loans have limits, ranging from $420,680 to $970,800 for single-family homes in 2022.
The Federal Housing Administration, or FHA, has limits on the size of mortgages it will guarantee.
FHA loans are a good option to consider for people who need a low down payment and flexible credit-approval terms to buy a home. FHA loans don’t have income limits for borrowers. Instead, the agency has a maximum loan amount it will insure, known as an FHA loan limit.
FHA loan limits vary by housing type and are based on the state and county in which the property is located. FHA loan limits in 2022 range from $420,680 in “low-cost” areas to up to $970,800 in “high-cost” areas for single-unit homes.
You can check what the limit is in your area by searching the FHA mortgage limits database.
- How FHA loan limits work
- What are 2022 FHA loan limits?
- How FHA loan limits are set
- Can I get a loan higher than the FHA loan limit?
How FHA loan limits work
The federal government supports homeownership in a variety of ways.
One way is by backing or guaranteeing loans made by banks and other lenders, which helps to make mortgages more available. The Federal Housing Administration — a division of the U.S. Department of Housing and Urban Development, or HUD — insures FHA loans by guaranteeing the lender that it will repay the balance of a borrower’s loan if the borrower stops making payments.
This guarantee means banks are more willing to lend money to borrowers who may not otherwise qualify for a home loan.
With more forgiving minimum credit score requirements and low down payment options, FHA loans can be appealing to low- to moderate-income and first-time homebuyers. But there are no income caps, and they’re available to repeat buyers.
On the other hand, the FHA limits the amount you can borrow.
What are 2022 FHA loan limits?
The FHA establishes loan limits annually based on the median home prices in metro areas and counties. The maximum loan amount is 115% of the area’s median home price, subject to a national floor and ceiling.
For example, in 2022, the national floor is $420,680, and the national ceiling is $970,800. But if 115% of the median house price in a certain area was $330,000, the FHA could still insure mortgages up to $420,680 in that area.
Likewise, if 115% of the median house price in a certain area was $1 million, the FHA would cap mortgages in that area at $970,800. The FHA insures home loans with a principal balance at or under the ceiling.
Some of the areas with FHA loan limits at the ceiling include Breckenridge, Colorado; Jackson, Wyoming; and most of the counties making up the Bay Area of California, the New York City/Newark New Jersey metro area and the Washington, D.C. metro area.The FHA adjusts the upper mortgage limits for Alaska, Hawaii, Guam and the U.S. Virgin Islands to account for the higher cost to buy a house in these areas.
How FHA loan limits are set
FHA loan limits are set according to a specific formula created by federal law.
The national ceiling and floor are based on median housing prices in accordance with the National Housing Act, according to HUD. The national FHA loan limit floor is 65% of the conforming loan limit, and the ceiling is 150% of the conforming loan limit.
In 2022, for example, the maximum conforming loan limit for a single-family property was $647,200. 65% of that amount is $420,680 — the FHA loan national floor. And 150% of that amount is $970,800.
The FHA typically announces loan limits for the coming year toward the end of the current year, following the Federal Housing Finance Agency’s announcement of conforming loan limits.
Can I get a loan higher than the FHA loan limit?
If the cost of the property you want to buy is greater than the standard FHA loan limit, you may still be able to use an FHA loan to finance the purchase. The mortgage amount needs to fall within the FHA loan limit available in your area. These loans are known as FHA jumbo loans.
But there are a few things to understand before you go this route.
- No cash back — Some buyers may wonder if it’s possible to apply for a loan that’s greater than the value of the home and get the remainder in cash at closing. Cash back isn’t allowed with FHA purchase loans. There are certain exceptions, but unless you’re getting a refund of something paid upfront that was later financed into the mortgage amount, don’t expect cash back.
- Higher minimum credit scores — Standard FHA loans require borrowers to have minimum credit scores of 500 or better (though some lenders have overlays requiring higher credit scores). Depending on the lender, the minimum credit score may be even higher for FHA jumbo loans.
- Higher loan costs — The cost of an FHA jumbo loan may be higher than the cost of a typical mortgage.
- No down payment assistance — Traditional FHA loans allow borrowers to get down payment assistance from programs sponsored by state or local governments and other organizations.
If you’re interested in using an FHA loan to finance your home, the next step is to apply for a mortgage with an FHA-approved lender. Not all banks and mortgage companies offer FHA loans, so check with your bank or use the HUD lender list search to find an FHA-approved lender in your area.
Be sure to shop around, as interest rates and requirements vary from lender to lender, even for the same type of mortgage.
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