Home prices have been on the rise since 2012, and although experts aren’t calling it a bubble just yet, higher sale prices rely on larger mortgage loans for financing. Loans guaranteed by the Federal Housing Administration have limits, and those limits increased in 2018.
Operating under the U.S. Department of Housing and Urban Development, the FHA insures mortgage loans to make homeownership achievable for buyers of modest means. The agency sets loan limits to ensure that as many of these buyers as possible can get the help they need for their home purchases. Find out how much you can borrow with an FHA loan.
How FHA Mortgage Limits Work
The FHA sets a “floor” (minimum loan limits) and a “ceiling” (maximum loan limits) for metropolitan areas and counties throughout the country to give consumers in low-cost areas equitable access to FHA loans.
The floor limit applies to areas with lower home prices, and the ceiling limit applies to high-priced areas. Limits for roughly 49 percent of metropolitan areas and counties fall somewhere in between the floor and ceiling.
How FHA Loan Limits Are Calculated
The FHA loan limits are based on the national conforming loan limits. A loan is “conforming” if it is under a certain value — $453,100 for 2018.
The FHA has separate limits for one-unit, two-unit, three-unit and four-unit properties — and it bases its floor and ceiling loan limits on the conforming limit that the federal mortgage companies Fannie Mae and Freddie Mac set for loans:
- The FHA’s floor for low-cost areas is 65 percent of the conforming limit.
- The FHA’s ceiling for high-priced areas is 150 percent of the conforming-loan limit.
- In between the floor and ceiling, the FHA limits equal 115 percent of a county’s or metropolitan area’s median home price.
FHA Loan Limits 2018
The following changes apply to FHA loan limits for 2018, based on single-unit properties:
- The floor limit increases from $275,665 to $294,515.
- The ceiling limit increases from $636,150 to $679,650.
- Exceptions apply to Alaska, Hawaii, Guam and the Virgin Islands, which have a ceiling of $1,019,475 due to high home construction costs.
These changes went into effect for loans assigned case numbers on or after Jan. 1, 2018.
Implications of FHA Loan Limit Changes
3,011 counties across the country have higher limits in 2018 than they had in 2017. Loan limits stayed the same in 223 counties. Average loan amounts for floor, ceiling and in-between counties are as follows:
- Average for counties at the floor: $153,138
- Average for counties between the floor and ceiling: $221,054
- Average for counties at the ceiling: $359,540
Home buyers in low-priced areas are most likely to benefit from the loan limit increases. The number of counties at the ceiling remained nearly unchanged at 2.3 percent for 2018, which was 2.5 percent in 2017.
Reverse Mortgage Limits
A home-equity conversion mortgage, also called a reverse mortgage, lets senior citizens draw from the equity in their homes without worrying about repayment. This FHA-insured loan doesn’t need to be repaid until the borrower dies or stops using the home as a primary residence for longer than a year.
The FHA imposes a loan limit on home-equity conversion mortgages, too. The limit is the same as the ceiling limit for other FHA-insured loans — 150 percent of the Fannie Mae and Freddie Mac conforming-loan limit, or $679,650 for 2018.
Find Your Loan Limit
The HUD website has an FHA Mortgage Limits page where you can search your county or metropolitan area to find your loan limit. Just enter your location and the limit year. You can also use this search engine to find limits for Fannie Mae and Freddie Mac conforming loans and FHA-insured home-equity conversion mortgage loans.