Understanding FHA Loan Limits by State

FHA loans are a type of mortgage insured by the Federal Housing Administration (FHA). They’re a suitable option for first-time homebuyers as they have lower minimum requirements than traditional mortgages, like a 3.5% down payment and a credit score of at least 500.

However, borrowers cannot just get approval for any amount. FHA loan limits are strict and vary based on factors including the location of your desired home.

Understanding these limits can help you determine if an FHA loan is right for your needs or if you should look at conventional loans instead. Explore the limits for different types of homes and understand how they’re calculated and why this matters.

Congress established the Federal Housing Administration (FHA) in 1934 to help Great Depression-era Americans purchase homes. As the nation became dominated by renters due to strict mortgage terms, FHA loans were intended to help Americans achieve their dream of homeownership.

However, FHA loans were not designed to replace mortgages from private lenders. To prevent this, FHA places strict limits on how much money you can borrow, as it is only meant to help those who can’t qualify for conventional loans.

In essence, FHA loan limits are the maximum amount the FHA will insure your mortgage for, based on the type of home you’re buying and your location. These limits vary given how median home prices change, depending on property type and local housing values. Additionally, FHA loan limits are updated annually to account for inflation.

For most one-unit homes, the FHA’s loan limits range between $472,030 to $1,089,300 in the continental U.S., depending on the cost of living in your area. Loan limits tend to increase year-over-year, so keeping track of the limits can help you decide when and where to purchase.

Review the FHA’s loan limits for 2023 below for different property types to see what your limit will look like.

The Department of Housing and Development (HUD) provides an online tool on their website to help you navigate the limits of your county.

If you want to use this tool, select your state from the drop-down list and type in your county. Then, set the "Limit Type" drop-down to "FHA Forward." The rest of the information should remain the same or empty, then click "send." You should see the conforming loan limits for your county under the "One-Family" column.

FHA loan limits are reassessed annually by HUD. The maximum amount of money that can be borrowed depends on the home’s location and the total number of units.

Generally, locations with lower costs will have a lower "floor," while areas with more significant costs will have a higher "ceiling." The "floor" for FHA loans at the national level is set at 65% of the conforming loan limit, while the "ceiling" for FHA loans at the national level is set at 150% of the conforming loan limit.

The price ceiling in high-cost places, typically densely populated cities like the Florida Keys or Los Angeles, generally is greater than in suburban areas. However, a high-cost area is defined as any location where the loan limit is higher than the floor. Remember that the increased FHA loan limits are only applicable in these high-cost areas.

In addition to location, the lending limit will also change depending on the property that you intend to buy. When compared to a single-family home, for instance, a property with four separate apartments will have a higher loan limit.

It is typical practice for the FHA to announce the loan limits for the following year toward the end of the current year.

FHA-insured mortgages offer many benefits, particularly for first-time homebuyers.

• FHA loans can be easier to qualify for than conventional loans. Lenders might be more willing to lend to you because FHA insures the mortgage, protecting them if you default.
• FHA loans are available if your credit isn’t perfect. Even if you had problems in the past like bankruptcy, you might be eligible for an FHA mortgage, although you might not qualify for a conventional loan.
• FHA mortgages require down payments of just 3.5%, a much lower down payment than conventional loans. Your down payment can come from a family member, employer or charitable organization as a gift. Other loan programs do not treat gifts for down payments so liberally.
• FHA mortgages offer competitive interest rates.

The FHA is not a lender. It does not lend to buyers directly or establish the interest rates on FHA loans. That's why shopping around and comparing mortgage interest rates and terms from different lenders can help you find the best deal.

Interest rates are not the only terms that matter. Loan limits are also critical because they determine the upper limit you can borrow, influencing the maximum price of the house you buy.

Homebuyers planning to purchase homes in high-cost areas may find that their options are limited under the FHA loan program. The FHA's loan limits may be prohibitively low, thus putting higher-cost homes out of the reach of many buyers.

There's good news for some of these buyers, however. Federal legislation — specifically, Section 214 of the National Housing Act — provides special exceptions for certain areas of the nation.

Alaska, Guam, Hawaii, and the Virgin Islands have their own loan limits. For a single-unit home, this limit may be as much as $721,050, depending on the area, and 150 percent of those limits for some circumstances. Check each state to learn the local limits.

Some homebuyers might be eligible for FHA jumbo loans, which have higher loan limits but come with added qualification requirements. An FHA loan with a principal balance in excess of $271,050 is considered to be a jumbo loan in many parts of the country. As with standard FHA loans, the loan limit ceilings for FHA jumbo loans can change annually and vary by your home's location.

Individual lenders set underwriting guidelines for FHA jumbo mortgages, which vary. Standards are usually tougher for FHA jumbo loans than they are for standard FHA loans to reduce the risk inherent in these larger mortgages. For example, applicants may need a higher credit score to qualify for an FHA jumbo loan.

Similarly, the maximum debt-to-income ratio might be lower for those seeking higher-balance FHA mortgages. Reserve requirements — the amount of assets you need to have on hand at the time you close the mortgage — may be increased. Some lenders might even require two appraisals depending on the property's location, the local housing market's health and how much you plan to borrow.

FHA loan limits can be confusing, given how they vary from state to state and county to county. Review some of the most frequently asked questions about them below.