FHA, or the Federal Housing Administration, have loans designed for middle- to low-income families. These loans are government-backed. In other words, private lenders issue these loans, but the FHA guarantees or insures them. As a result, if you fail to repay your loan, the FHA will pay the lender on your behalf.
FHA loans have strict lending guidelines. One restriction is the loan limits. FHA loans have “floors” and “ceilings.”
The “floor” limit is the lowest loan limit whereas the “ceiling” limit is the highest loan limit. FHA monitors changing home prices and updates these limits accordingly.
It is important to note that FHA floor and ceiling loan limits vary by state and county. Cost of living varies from city to city. As a result, FHA loans adjust to home prices of the area. There are low-cost areas, high-cost areas, as well as special exceptions. These exemptions are places that have higher construction costs, such as Alaska, Hawaii, Guam, and the Virgin Islands.
For example, according to the 2019 FHA loan limits, a one-unit property in a low-cost area is $314,827. On the other hand, a one-unit property in a high-cost area is $726,525. For special exception areas, a one-unit property costs $1,089,787.
In general, FHA loan limits are determined by location and a percentage of the national conforming loan limits. The national conforming loan limits are derived from conventional mortgages which must conform to guidelines set out by Fannie Mae and Freddie Mac.
The FHA national low-cost area mortgage limit, or the FHA floor, is 65% of national conforming loan limit. On the other end of the spectrum, the FHA ceiling is 150% of the conforming limit. However, this only applies to certain areas that are considered high cost. For instance, in 2019, the loan limits in Alabama range from $314,827 to $636,900. However, in New York, the loan limits range from $314,827 to $1,397,400.
To find the FHA loan limit in your state and county, visit the U.S. Department of Housing and Urban Development or HUD’s website.
Despite the maximum FHA loan amount allowed in your geographic location, other eligibility requirements also determine what amount you are qualified for.
For example, some lenders may have stricter requirements than FHA guidelines. Therefore, you may need to shop around and look at different FHA-approved lenders. Furthermore, your debt-to-income ratio, as well as your credit scores, also determine how qualified you are as a borrower.