The Federal Housing Administration (FHA) has continually increased its lending limits in recent years due to steep increases in home prices. And that’s great news for borrowers.
If you’re buying a new home, a higher loan limit means wider opportunities when shopping for new homes and negotiating with sellers.
Keep reading to know the updated FHA loan limits for 2023, why the limits are higher, and what this increase means for you as a Texan looking to buy a home in Houston, Texas with an FHA loan.
Understanding FHA loan limits: What’s new in 2023?
The FHA has maximum loan amounts it will insure. This means there’s a limit to the amount you can borrow when taking out an FHA loan.
The FHA sets loan limits based on the terms of the National Housing Act. They use a percentage of the conforming loan limit amounts the Federal Housing Finance Agency (FHFA) sets annually for conventional loans, also known as conforming loans.
These conventional loans follow the rules set by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).
The FHA sets loan limits at 115% of a county’s median home price, leading to varying loan limits.
- The FHA loan limit “floor” this 2023 is $472,030 for a single-unit home in most areas. This amount is 65% of the existing conforming loan limit of $726,200. It is a 12.21% increase over the FHA loan limit of $420,680 last 2022.
- The maximum limit or “ceiling” increased to $1,089,300 for a single-unit home in high-cost counties from the 2022 loan limit of $970,800. This amount is 150% of the current conforming loan limit.
- In 2023, the FHA loan limits have increased in over 3,000 counties. Only 12 counties have unchanged loan limits.
FHA loan limits are updated at the start of each calendar year.
Why FHA loan limits are higher in 2023
2021 was a year of record-low interest rates, low foreclosure rates, and high home sales.
Interestingly, rising mortgage rates and inflation led to an overall decline in the housing market in 2022.
- Skyrocketing mortgage rates led to higher costs of borrowing for a home last year. Still, average home prices continue to increase year after year.
- As the housing market has become less affordable, the FHA decided to raise its loan limits for 2023 in response to an upsurge in home prices.
Factors affecting FHA loan limits
Three primary factors impact FHA loan limits in your area:
- Your location. Maximum FHA loans vary for low-cost and high-cost areas.
- Median home prices for the recent four quarters. The FHA evaluates the median prices in every state to identify low-cost and high-cost areas. Counties with high median prices within a Metropolitan Statistical Area (MSA) have high-cost limits. FHA loan limits are higher when you live close to an expensive city. For example, New York County has a higher loan limit than Niagara County.
- A property’s number of units. Loan limits are higher when a homebuyer purchases a property with multiple units. For example, a duplex with one unit as your home and another unit to rent out.
New Loan Limits in 2023
Check out this chart to see the updated FHA loan limits this year.
|
Type of Home
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FHA loan limits for low-cost areas
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FHA loan limits for high-cost counties
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Alaska, Guam, Hawaii, and the US Virgin Islands
|
|
One-Unit Property
|
$472,030
|
$1,089,300
|
$1,633,950
|
|
Duplex Property
|
$604,400
|
$1,394,775
|
$2,092,150
|
|
Triplex Property
|
$730,525
|
$1,685,850
|
$2,528,775
|
|
Four-Unit Property
|
$907,900
|
$2,095,200
|
$3,142,800
|
The FHA limits for a single-unit home loan in Alaska, Hawaii, Guam, and US Virgin jumped from $1,456,200 to $1,633,950. These places have higher construction costs, hence higher loan limits.
FAQs
What do higher FHA loan limits mean for homebuyers?
Higher FHA loan limits mean more flexibility for homebuyers. You may be able to take out a larger FHA loan to attain homeownership.
What other factors will affect my chances of closing a deal on a home?
Your personal finances and the type of property you want are critical factors. Existing mortgage rates and your local real estate market will also impact your chances of closing a deal on a home.
Key Takeaways
- FHA loan limits increased due to house price appreciation.
- Low-cost and high-cost areas have varying loan limits.
- Borrowers may be able to take out larger loans this year.
Whether you’re planning to buy a new home or refinance a loan, knowing the current FHA loan limits will help you make a smart and well-informed decision.
Do you have questions about getting an FHA home loan? We’d love to help!
Contact us today, and one of our experts will guide you from start to finish.
