FHA borrowers have a bigger budget when it comes to buying a home in 2021. The U.S. Department of Housing and Urban Development (HUD) increased FHA loan limits for most U.S. counties this year. Here’s what to know if you’re looking for a mortgage with a low down payment.
What are FHA loan limits?
FHA loan limits are the maximum amounts that the FHA (Federal Housing Administration) will insure for different categories of home mortgage loans — for example, single-family homes and duplexes — in different counties in each state.
Loan limits, which vary with local housing values and by property type, are calculated and updated annually, and are influenced by the conventional loan limits set by Fannie Mae and Freddie Mac.
An FHA mortgage loan is one issued by an FHA-approved lender and insured by the FHA. Designed for low- to moderate-income borrowers, FHA loans enable borrowers to qualify with lower minimum down payments and lower credit scores than are required for many conventional loans, which are not guaranteed or insured by a government agency.
FHA loan limits 2021
|FHA loan limits||Most areas||High-cost areas|
|Duplexes (two units)||$456,275||$1,053,000|
|Triplexes (three units)||$551,500||$1,272,750|
For single-family home loans this year, the FHA loan limits range from a floor of $356,362, an increase of more than $20,000 over 2020, to a ceiling of $822,375, an increase of nearly $60,000. More expensive areas have higher FHA loan limits. For example, a house in San Francisco has a higher valuation than a comparable house in Houston.
National conforming loan limits for Fannie Mae and Freddie Mac jumped in 2021 to $548,250, making FHA’s floor limits about 65 percent of their conforming-loan counterparts. Conforming limits are also higher in high-cost counties. Mortgages above these limits are known as non-conforming or jumbo loans.
FHA-insured Home Equity Conversion Mortgages (HECMs), also known as reverse mortgages, got a jump in limits, too, to $822,375 for all areas, an increase of $56,775 from 2020’s $765,600 limit. This change is effective for all case numbers assigned on or after January 1, 2021, through December 31, 2021.
How to find FHA loan limits for your area
To help you find the limit for any county or state, Bankrate has compiled the limits for every county in the nation here. HUD also has an online search tool to help you find FHA loan limits. You can search by county or state.
Factors affecting FHA limits in 2021
The hike in limits is due to swelling home prices. In the third quarter of 2020, existing single-family home prices rose 12 percent to $313,500 from a year earlier, according to data from the National Association of Realtors (NAR).
The National Housing Act, as amended by the Housing and Economic Recovery Act of 2008 (HERA), mandates that the FHA set single-family forward loan limits at 115 percent of median home prices, and that they can’t be more than 150 percent of the standard limit.
HERA rules state that the FHA must set floor and ceiling loan limits based on the loan limit set by conventional mortgages backed by Fannie Mae and Freddie Mac. In 2021, the national conforming loan limits for Fannie Mae and Freddie Mac ticked up to $548,250, making FHA’s floor limits 65 percent of their conforming-loan counterparts.
The majority of housing markets with high FHA ceilings are concentrated in the San Francisco-Oakland-Berkeley; Washington-Arlington-Alexandria; and New York-Newark-Jersey City metro areas. Within these areas are the five most expensive markets, according to NAR Q3 2020 data: San Jose (median existing single-family price of $1.4 million); San Francisco ($1.125 million); Anaheim ($910,000); Honolulu ($866,200); and San Diego ($729,000).