FHA Loan Limits: What are they and how do they work?

What is the borrowing limit with an FHA loan?

Very nice homeThe Federal Housing Administration (FHA) sets the maximum lending limit for US counties each year. Except for properties situated in Metropolitan Statistical Areas (MSAs) as established by the Office of Management and Budget, lending limitations are set by the county in which a property is located.

The FHA established (forward lending) ceilings for single-family homes at 115 percent of median house values. FHA loan limitations are the maximum amount you may borrow with an FHA-backed mortgage. The lending limits vary by county and are modified on a yearly basis depending on home prices. FHA loan limitations are classified into two types: "low cost" and "high cost."

The cost of living and population density have a significant role in determining whether a region is "high cost" or "low cost." When a significant number of houses in a certain region greatly exceeds the median home value, the lending limit for that area rises. The lending limits for low-cost regions are established at 65 percent of the baseline conforming level. High-cost regions may exceed 150 percent of the baseline.

2022 FHA Loan Limits

Notice that the lending limits increase with multiple unit properties.

 Low-cost area limits

The FHA national low-cost area mortgage limitations, which are set at 65 percent of the national conforming limit of $548,250 for a one-unit property, are as follows,

  • One-unit: $420,680
  • Two-unit: $538,650
  • Three-unit: $651,050
  • Four-unit: $809,150

High-cost area limits

The FHA national high-cost region mortgage limitations, which are set at 150 percent of the national conforming limit of $548,250 for a one-unit home, are as follows:

  • One-unit: $970,800
  • Two-unit: $1,243,050
  • Three-unit: $1,502,475
  • Four-unit: $1,867,275

Hawaii, Guam, and the Virgin Islands have special allowances for them:

  • One-unit: $1,456,200
  • Two-unit: $1,864,575
  • Three-unit: $2,253,700
  • Four-unit: $2,800,900

FHA Sales Price Limits

What is the maximum sales price for a home with an FHA mortgage?

To determine the maximum sales price for a home with an FHA mortgage, simply divide the maximum loan amount for your county by 96.50%.
For example: $356,362/96.50% = $369,287

Conclusion

In conclusion, the FHA loan limit increase will provide more opportunities for affordable home ownership. This is great news for first-time buyers, as well as those who are looking to upgrade to a larger home. If you are interested in learning more about the FHA loan limit increase, be sure to contact your local mortgage lender.