Buying a higher-priced home? FHA loan limits determine the maximum FHA-insured mortgage amount you can borrow. For 2023, the baseline FHA loan limit is $420,680 but it goes up to $970,800 in pricier housing markets. Read on to learn more about current FHA limits, how they’re calculated, and what to do if your mortgage needs exceed the ceiling in your area.
What Are FHA Loan Limits?
FHA loan limits set the maximum mortgage amount the Federal Housing Administration will insure for loans in different counties across the United States. If the mortgage is above the FHA loan limit for that location, the mortgage cannot be FHA-insured.
These limits vary by county and are based on medians home prices and statutorily set baseline floors and ceilings. Higher limits apply in more expensive housing markets.
For a home purchase, the FHA loan amount cannot exceed the applicable limit for where the property is located. This means borrowers in lower-cost markets may not be able to secure FHA financing above a certain threshold.
Current FHA Loan Limits for 2023
The Housing and Economic Recovery Act establishes baseline FHA loan limits that are adjusted annually based on housing price trends.
Here are the current limits for 2023:
Minimum FHA Loan Limit – Floors are set at 65% of the national conforming limit of $702,000. So the minimum is $420,680 (lower in some markets).
Maximum FHA Loan Limit – Ceilings are set at 150% of the local conforming limit. In most high-cost areas, the max is $970,800.
Average Limit – The average 2023 FHA loan limit is $420,680. This is an increase of around 10% from the average $381,550 limit in 2022.
These increased limits for 2023 make FHA financing an option for more buyers looking at homes above the $381,550 average loan limit last year.
How FHA Loan Limits Are Calculated
FHA loan limits begin with a baseline set by statute at 65% of the conforming loan limit – which is $702,000 in 2023. From there, the process involves these steps:
1. Floor – The baseline of 65% of the conforming loan limit sets a minimum floor for all FHA loans. This is $420,680 in 2023.
2. Median Home Price – The median home price for the area is used to calculate FHA limits above the floor. The limit is set at between 100-150% of area median price.
3. Ceiling – The maximum FHA loan limit ceiling is 150% of the local conforming limit. For 2023, the ceiling is $970,800 in most high-cost areas.
So in expensive metro areas, the maximum FHA loan limit borrowers can qualify for is $970,800. In lower-cost counties, it drops to a floor around $420,680 up to the area’s median home price.
Checking FHA Limits By County
FHA loan limits vary widely by county and location. To check the limits:
- Look up your county on the FHA loan limit lookup tool from the U.S. Department of Housing and Urban Development.
- Ask lenders for a list of FHA/VA limits in your area. Most can provide the data.
- Check recent guidance from the FHA outlining the latest loan limits.
- Contact a real estate agent who can advise on the FHA limit for the county where you want to buy.
The standard maximum FHA loan most borrowers qualify for is $420,680. But buyers in expensive metro areas like California, New York, Washington DC or Hawaii may qualify for FHA loans up to $970,800.
What If My Loan Exceeds FHA Limits?
Because FHA loan limits are tied to median home values in a region, they may be lower than you need to buy more expensive properties. If your mortgage amount exceeds your area’s FHA loan cap, you have a few options:
Make a larger down payment – Putting down a larger down payment brings the loan amount below the limit.
Use another government program – Options like VA loans have higher limits than FHA in some markets.
Go with conventional financing – Conventional loans have no set loan limits, so can accommodate higher mortgages.
Buy a lower-priced property – Shifting your home search to lower-priced listings may allow an FHA loan to work.
Get a second mortgage – Pair an FHA first mortgage with a second loan for additional funds.
Run the numbers to see if you can make one of these scenarios work to buy the home you want.
Tips for Getting the Highest FHA Loan Amount
While FHA loans offer helpful benefits, the limits may fall short if you’re buying a higher-priced or jumbo property. A few tips can help maximize how much you can borrow with an FHA loan:
- Improve your credit score – Higher FICOs qualify for the max
- Shop lenders – Some allow higher ratios to stretch limits
- Lower your DTI if possible – Allows more loan capacity
- Make a larger down payment – Decreases the amount required
- Adjust your home search – Stay under caps for your market
- Seek co-borrowers – Add income to qualify for higher limits
- Get a second mortgage – Fills gaps above FHA loan ceiling
With proper planning, an FHA loan can still be an affordable option even if your purchase is pushing up against the limits.
FHA Loan Limits FAQs
Do you still have some lingering questions about FHA loan limits and how they impact your borrowing power? Here are answers to some frequently asked questions:
How often do FHA loan limits change?
FHA loan limits are re-evaluated annually based on changes to median home values and the conforming loan limit. Typically new limits are issued for each calendar year.
Do FHA loan limits apply to refinances?
Yes, FHA refinances are subject to the same loan limits based on the property’s location. Cash-out refis have lower max loan-to-value ratios.
Can I get an exception to go over FHA limits?
No, the FHA limits cannot be exceeded, even with a larger down payment. The only option is alternative financing like a second mortgage.
Do FHA loan limits affect interest rates?
Not directly. But if you bump up against the limits, you may need to shift to a conventional loan with possibly higher rates.
Where are FHA loan limits the highest?
The highest FHA loan limits for 2023 are $970,800 and apply to metro areas like San Francisco, Los Angeles, San Diego and others with very high home prices.
Can I use an FHA loan for a luxury home?
Only in the most expensive markets where the $970,800 limit applies. In areas with lower FHA limits, you’ll need a jumbo loan for luxury properties.
The Takeaway on FHA Loan Limits
FHA loans can be a great option – but shop carefully if buying a higher-priced home. Compare FHA limits to your expected mortgage amount and explore alternatives if you bump up against the caps. With the right financing strategy, you can still capitalize on FHA benefits even when purchasing a pricier property.