FHA Loan Requirements, Limits and Approval Tips
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FHA Loan Limits for 2023

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The 2023 FHA loan limits enable buyers looking for a mortgage backed by the Federal Housing Administration (FHA) to borrow up to $472,030 for a single-family home in most parts of the country. That’s an increase of $51,350 from last year’s $420,680 FHA loan limit, which is good news for homebuyers with small down payments or lackluster credit histories.

Buyers in high-cost areas can borrow over $1 million dollars — $1,089,300 for a one-unit home, to be exact — if they’re looking for a home in an expensive neighborhood.

2023 FHA loan limits

FHA loan limits are the maximum loan amounts borrowers can receive when taking out an FHA mortgage. Set by the FHA according to the terms of the National Housing Act, FHA loan limits are based on a percentage of the conforming loan limit amounts set each year by the Federal Housing Finance Agency (FHFA) for conventional loans. Conventional loans are also called conforming loans because they “conform” to rules set by Fannie Mae and Freddie Mac.

Number of unitsLow-cost loan limitHigh-cost loan limit
One unit$472,030$1,089,300
Two units$604,400$1,394,775
Three units$730,525$1,685,850
Four units$907,900$2,095,200

How are FHA loan limits determined?

The FHA loan limit “floor” is 65% of the current conforming loan limit of $726,200 — or $472,030 — for a one-unit home in most counties across the country. The FHA loan max, or “ceiling,” in high-cost areas is $1,089,300 — which is 150% of the conforming loan limit.

The 2023 FHA loan limits for single-family homes increased 12.21% over the 2022 FHA loan limits of $420,680 for most areas and $970,800 in high-cost areas. The increases were due to higher median home prices throughout the U.S. in 2022.

HECM LOAN LIMITS

Home equity conversion mortgages (HECMs), more commonly known as reverse mortgages, also benefit from increased FHA loan limits: In 2023, qualified seniors can borrow up to $1,089,300 from an FHA-approved lender.

What factors affect FHA loan limits?

There are three factors that affect FHA loan limits in your area:

  1. What county your home is located in. The FHA calculates limits based on Metropolitan Statistical Areas (MSAs) and counties, which means the maximum FHA loan can vary widely in any given state.
  2. The number of units situated on your property. The FHA gives you more borrowing power to buy a multifamily home than a single-family home.
  3. The median home prices for the past four quarters. The FHA looks at the median prices in each state to determine whether the county is considered a low-cost or high-cost area. The high-cost limits are set using the county with the highest median price within an MSA. In simpler terms, the closer you live to an expensive city, the higher the limits are likely to be.

What is the FHA max loan amount I qualify for?

An FHA-approved lender will review your loan application to see if you meet the minimum mortgage requirements for an FHA loan, which are more flexible than the guidelines for conventional loans.

Credit score and down payment. You’ll need a 580 credit score for a 3.5% minimum down payment. Lenders may approve scores as low as 500 with a 10% down payment.

Income and employment history. A two-year stable employment and income history is the standard requirement for an FHA loan.

DTI ratio. Lenders focus on the total debt you carry divided by your before-tax income to calculate your debt-to-income (DTI) ratio. Most lenders prefer a 43% maximum, but exceptions are possible.

Occupancy. Homes financed by FHA loans must be primary residences.

Home appraisal. FHA appraisers assess the value of your home and whether it meets strict safety and habitability requirements set by FHA appraisal guidelines.

THINGS TO KNOW

FHA borrowers have an advantage over conventional borrowers when it comes to buying multifamily homes:

  • They can buy the property with as little as 3.5% down. That’s much lower than the 15% down payment typically required by conventional lenders.
  • They can use rental income on the units to qualify. This can be a great way for first-time homebuyers to own a home and earn extra income at the same time. One catch: The homebuyer must live in one of the units as a primary residence for at least 12 months.
  • They have more borrowing power. The loan limits increase with the number of units, up to a maximum of four.
 

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