Top 11 States with the Most FHA Loan Limit Increases in 2016

Did you have Minnesota on your list of hot real estate markets? What about Indiana or Tennessee?

While those states might not spring to mind as the most trendy places to buy property, if you judge by FHA loan limit increases, these are all among the top 10 states for thriving housing markets – and ones where higher FHA limits might have opened the door to buyers a little bit wider.

FHA Loan Limit Rules

The FHA sets different dollar limits for mortgages from one county to another, based on differing real estate values from place to place. These limits are reset annually to adjust to changes in the market.

Since FHA mortgages are available for residences with between one and four units, different loan levels apply according to the number of units. However, typically a rise in the limit for single-unit properties will be accompanied by rises for multi-unit properties in the same counties.

As real estate values have recovered from the housing crisis, prices have grown at widely-varying paces from one market to another. That's why some counties saw increases in FHA loan limits for 2016, while many others did not.

States with the Most FHA Loan Limit Increases this Year

So where can you qualify for a larger FHA loan this year? While fewer than half the 50 states had counties where loan limits were increased, some states had multiple counties that were given higher FHA loan limits. Here are the states with the most counties receiving increases for 2016:

1. Texas. Texas had a whopping 29 counties receiving FHA loan limit increases for 2016. Obviously, it helps that Texas is so big, but since loan limits are adjusting to local price changes, it also matters that the state is home to some of the hottest real estate markets in the nation, such as the Dallas area.

2. Indiana. Though perhaps far less obvious than Texas as a thriving housing market, Indiana placed second with 16 counties receiving FHA loan limit increases for 2016, most of them around the Indianapolis area.

3. (tie) Colorado. Next up is a four-way tie of states with 14 counties each receiving higher FHA mortgage limits in 2016. Colorado is no surprise since it is home to Denver, one of the fastest-rising housing markets in the nation.

3. (tie) Minnesota. The 14 counties receiving higher FHA loan limits in Minnesota are clustered around the Twin Cities.

3. (tie) North Carolina. Many of the 14 counties in North Carolina receiving higher loan limits are in the Charlotte area, though the Durham-Chapel Hill region claimed some, too.

3. (tie) Tennessee. Nashville seems to be the focal point of the 14 Tennessee counties receiving boosts to their FHA loan limits this year.

7. North Dakota. This state has seen a huge natural resource boom in recent years, though lower oil prices are likely to hurt going forward. Still, home values have advanced sufficiently for nine counties in the state to get higher FHA mortgage limits in 2016.

8. Florida. With eight counties receiving higher loan limits for 2016, this is a comeback story for a state which experienced some of the worst of the housing collapse.

9. (tie) California. Thanks to a three-way tie for ninth among states with seven counties receiving higher loan limits, what started out as a top-10 list actually includes 11 states. Since California is home to some of the most expensive real estate in the nation, it is not surprising to see it on this list.

9. (tie) Kentucky. Look around the Louisville area to find Kentucky's seven counties with higher loan limits for 2016.

9. (tie) Oregon. Over the past year, Portland has had the fastest growth of the metropolitan areas in the S&P/Case-Shiller 20-City Composite Home Price Index, so it is easy to see why Portland rounds out this list with seven counties receiving higher loan limits.

If you live in one of these states, you have a better chance than most of benefiting from FHA loan limit increases. To see if the limit increased in areas near you, you can view the complete list of counties with higher limits this year from the FHA's parent, the U.S. Department of Housing and Urban Development.

While most states did not see any increases in loan limits this year, the good news is that those limits were not decreased in any areas for 2016.

Catching a Moving Target

As mentioned previously, raising FHA loan limits in some counties effectively opens the door to home buyers in those areas a little wider. Keep in mind though, that door can also shut quickly.

The rise in FHA loan limits simply reflects the reality that housing prices have risen in those areas. The loan limits are adjusted to try to catch up, but if real estate prices keep rising, as the year goes along it will become harder and harder to find properties in those areas whose prices are still within those loan limits.

So if you live in one of the affected areas, you have been given more pricing latitude to qualify for an FHA loan. If you are serious about buying a home, the sooner you act the better advantage you can take of that latitude.

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