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The Federal Housing Administration sets FHA loan limits on an annual basis. FHA home loans have a maximum loan amount that is established in accordance with the National Housing Act. FHA and HUD adjust the limits at the end of the closing year and before the new year.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

How Do FHA Loan Limits Work?

July 1, 2020

How Do FHA Loan Limits Work?
The Federal Housing Administration sets FHA loan limits on an annual basis. FHA home loans have a maximum loan amount that is established in accordance with the National Housing Act. Let's explore the FHA rules in a moment while we keep the following in mind:
 
  • FHA mortgage loan limits will vary by county.
  • FHA loan limits discussed here affect forward mortgages (AKA purchase loans).
  • Loan limits may be exceeded if you are applying for an FHA Jumbo loan.
  • FHA home loan limits are affected by the size of the property you purchase (based on living units).
  • FHA loan limits are set annually.

How do FHA loan limits work? They are set based on “median house prices” and are subject to adjustments according to the Metropolitan Statistical Area (MSA) and county (as defined below). FHA and HUD adjust the limits at the end of the closing year and before the new year.

FHA loan rules require the establishment of an average, but also a limit for high-cost real estate markets and low-cost markets.

EXAMPLE: 2020 FHA Loan Limits for Low-Cost Areas

FHA national low-cost area mortgage limits are set at 65 percent of the national conforming limit of $510,400 for a one-unit Property. FHA loan limits in 2020 (listed here as an example and a reference only--limits may vary depending on the year) include:
 
  • One-unit home in 2020: $331,760
  • Two-unit home in 2020: $424,800
  • Three-units in 2020: $513,450
  • Four-units in 2020: $638,100

High-cost areas are set at 150 percent of the national conforming limit of $510,400 for a one-unit Property include the following limits:
 
  • One-unit home in 2020: $765,600
  • Two-units in 2020: $980,325
  • Three-units in 2020: $1,184,925
  • Four-units in 2020: $1,472,550
These limits are subject to change year to year.

How FHA Determines  Loan Limits

“Loan limits are determined by the county in which a property is located, except for properties located in Metropolitan Statistical Areas (MSAs) as defined by the Office of Management and Budget,” per the FHA official website. FHA sets the limits in these areas “using the county with the highest median price within the metropolitan statistical area.” 

FHA loan rules say that for determining high-cost areas HUD employs “indexing of county-level prices” starting in 2008 (the same year the FHA established the “current statutory authorities” for FHA limits.

Each year when the limits are revised, many areas stay the same and do not increase. In some areas, the amounts will rise, but in a comparatively smaller number of areas the FHA loan limits may actually decrease. For these areas where FHA loan limits have been reduced, the FHA publishes a list of these areas separately.

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