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FHA Loan Limits: Tips for Securing an FHA Loan in 2019

FHA loan limits

FHA loans are mortgages insured by the U.S. Department of Housing and Urban Development (HUD), and they’re specially designed to help consumers who have small savings or limited credit buy a home, with down payments as low as 3.5%.

For FHA mortgages, loan limits for single-family homes range nationwide from $314,827 in most counties to $726,525 in counties with the highest cost of living.

What is an FHA loan limit?

FHA loans aren’t meant to help people buy extravagant houses, so HUD limits the size of the mortgage to 115% of the median price of a home in the county. But HUD also limits the size of these loans by setting what it refers to as both a loan “floor” and “ceiling.”

The FHA floor is the maximum loan amount that borrowers can receive in most low- and moderate-cost areas. The FHA will insure loans that are smaller than the FHA loan floor, but it will generally not approve more than it. In 2019, the FHA floor was raised to $314,827 for a single-family home. According to recent FHA data, more than 80% of U.S. counties now have a minimum lending amount that is the same as the FHA floor.

The FHA ceiling is the maximum loan amount that borrowers can take out where the cost of living is higher. The FHA sets the ceiling for lending based on limits for conforming mortgages, or mortgages that conform to guidelines set by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).  In 2019, the FHA loan ceiling is $726,525 in high-cost areas. However, this maximum loan amount now applies to only 2% of U.S. counties.

About 15% of counties now have loan limits that fall in between the FHA ceiling and floor. For these counties, FHA loan limits are equal to 115% of the median home price for the county.  

How do FHA loan limits compare to conforming loan limits?

The FHA sets its most common lending maximum at 65% of the limits on conforming mortgages, now the most common type of mortgage in the United States.

The conforming loan limit where home prices are close to the national median is currently $484,350 for a one-unit home. By comparison, the FHA loan limit in these same areas is just $314,827.  This means buyers who want to purchase homes that cost more than the FHA’s $314,827 loan limit will most likely have to choose a conforming loan.

In those parts of the country that have higher home prices, the FHA has a higher loan maximum. The maximum loan limit for both FHA mortgages and conforming mortgages is currently the same: $726,525. This means in areas where home prices are the highest, loan limits for FHA and conforming mortgages will be the same. Buyers will need to decide which loan works best for them based on factors such as credit score and down payment requirements, rather than loan limits.

You can find the FHA and conforming (Fannie/Freddie) loan limit for your county using the FHA loan limit lookup tool. Be sure to select CY 2019 and FHA Forward when searching.

How did FHA loan limits change for 2019?

Thanks to rising home prices across the country, FHA loan limits increased in most counties in 2019. Most of the hikes were driven by a 7% increase in the FHA floor and FHA ceiling. The FHA floor for single-family homes went from $294,515 to $314,827. At the same time, the FHA ceiling went from from $679,650 to $726,525.

In 181 counties, FHA loan limits remained the same between 2018 and 2019. These counties did not experience rising home prices. Some of these counties may have seen falling home prices, but HUD did not push loan limits down in any county.

FHA loan limits for 2019 (according to property unit size)

FHA Loan Floor FHA Loan Ceiling
1 Unit $314,827 $726,525
2 Units $403,125 $930,300
3 Units $487,250 $1,124,475
4 Units $605,525 $1,397,400

Source: Federal Housing Administration

FHA loan limits by county

In general, FHA loan limits tend to be higher in large, urban areas. These limits reflect the higher home prices that tend to come with urban living. Across the U.S., counties with the highest FHA loan limits are most often those surrounding expensive coastal cities, such as Los Angeles, Seattle, Washington D.C. and New York City.

Conforming loan limits for 2019

If an FHA loan doesn’t suit your needs, a conforming mortgage may be a better option. These loans have higher limits in low-cost areas, so they might be a better choice if you are shopping in an inexpensive area. It may also be a better choice for borrowers with good credit who can afford a larger down payment.

These are the conforming loan limits for 2019:

Conforming loan limits for 2019 (according to property unit size)

Conforming Mortgage Loan Floor Conforming Mortgage Loan Ceiling
1 Unit $484,350 $726,525
2 Units $620,200 $930,300
3 Units $749,650 $1,124,475
4 Units $931,600 $1,397,400

Source:  Fannie Mae

You can use this map from the Federal Housing Finance Agency to figure out the 2019 conforming loan limit for your county.

Historic FHA loan limits

Since 2008, FHA loan limits have been tied to both median home prices and loan limits for conforming loans. In 2019, the FHA floor level reached a new all-time high, but the current ceiling for FHA loans ($726,525) is still below the $729,750 ceiling between 2008 and 2013.

During the 2008 to 2013 time period, the FHA ceiling was temporarily raised in response to the housing market collapse. Following the recovery, the FHA loan limit ceiling has risen at the same rate as housing prices across the nation.

Source: Federal Housing Finance Agency and LendingTree

Reverse mortgage loan limits for 2019

Reverse mortgages let senior citizens tap into their home equity without having to sell their home or make payments on the loan. An FHA reverse mortgage, called a Home Equity Conversion Mortgage (HECM), can make this type of loan even safer and more accessible than a proprietary reverse mortgage, though the loans are expensive. HECMs are HUD-insured mortgages. In 2019, the maximum loan limit for a HECM is $726,525. However, the particular reverse mortgage limit for your house will depend on your age and the value of the property.

If you have a home worth more than $726,525, and you want to take out a reverse mortgage, you may want to consider a jumbo reverse mortgage. These proprietary products let homeowners borrow larger amounts based on the value of their home.

What happens if the house you want is more than the FHA limit?

Looking to buy a house that is more expensive than the FHA loan limits in your area? You may still have options. First, you could put down a larger down payment. A bigger down payment means you can buy a more expensive home even if the FHA loan limit remains the same.

Homebuyers can also consider a conforming mortgage. In 80% of counties, the conforming mortgage limit is nearly a third higher than the FHA loan limit. Buyers with a good credit score, sufficient income and a 3-5% down payment may be able to qualify for a conforming mortgage up to $484,350.

However, in the most expensive cities, loan limits on both FHA loans and conforming mortgages may not be high enough for you. In those cases, you’ll need to consider a jumbo mortgage. Jumbo mortgages have the highest loan limits, but they also have stricter underwriting conditions. For example, you may need a very good credit score or a large down payment to secure a jumbo loan.  

Is an FHA loan right for you?

FHA loans allow borrowers with down payments as low as 3.5% or credit scores as low as 500 to buy homes. This makes them a popular loan among first-time homebuyers. However, these loans may not be the right choice for you.

If you want to buy a house worth more than the FHA loan limit in your area, a conforming loan or a jumbo mortgage may make more sense. In addition, borrowers with excellent credit or large down payments may find that a conforming loan costs less in the long run. Be sure to check rates on FHA loans and conforming loans before you decide which loan to pick.

How to secure an FHA loan in 2019

If you decide to take out an FHA loan for your next home purchase, here is what to do to make the buying process easier:

Check your credit score. You need at least a 500 credit score to take out an FHA loan. You’ll need a 580 credit score to put down the minimum 3.5%. Check your credit score for free with LendingTree.

Be sure your home is within the loan limits. Remember, the house you purchase has to be below the loan limits for your county. Check the loan limits for your county here.

Save your down payment. To take out an FHA loan, you’ll need at least a 3.5% down payment.

Check to see if you can afford payments. In most cases, your monthly payment for an FHA loan must be less than 31% of your income. Be sure you can afford your new mortgage by using this calculator.

Compare rates. When it comes to taking out a mortgage, comparing rates can save you thousands of dollars over the life of the loan. You can use LendingTree’s FHA loan application to compare rates from multiple lenders with a single application.

Bottom line

With FHA loan limits rising in 2019, many buyers, especially first-time homebuyers, may find the loan suits their needs. Be sure to compare your loan options and shop for the best rates to guarantee that an FHA mortgage is really the right option for you.

 

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