UPDATE (August 28, 2016) : This post reflects updated FHA mortgage loan limits for the 2016 calendar year. A complete list of FHA loan limits, listed by U.S. county, is available online.
The Federal Housing Administration (FHA) has released a mortgage loan limit update.
Effective immediately, FHA-insured mortgages are now available for loan sizes up to $625,500 for one-unit homes; except when used for FHA Streamline Refinance program, for which the FHA loan limits range to $729,750.
FHA loan limits are higher for 2-unit, 3-unit and 4-unit properties; and for homes in Honolulu, Hawaii and several other Hawaiian cities.
As compared to the prior year, 2016 FHA loan limits are higher in 118 counties nationwide.Click to see today's rates (Aug 28th, 2016)
It can be confusing, but the FHA is not actually a mortgage lender. Rather, it's a mortgage loan insurer. The FHA provides insurance which protects against loss the banks which make "FHA loans".
The FHA keeps a book of rules and says, "so long as you make loans that follow these requirements, we will insure those loans against loss."
FHA-backed loans are often easier for which to qualify than their conforming mortgage counterparts, and come with a number of home buyer-friendly characteristics.
As a few examples of the FHA's buyer-friendly rules:
The FHA is also extremely friendly toward home buyers who have had a recent economic event.
Via the agency's Back to Work program, buyers can get FHA-approved just 12 months after experiencing a bankruptcy, short sale, or foreclosure.
There are other FHA loan perks, too.
For example, FHA loans are assumable. This means that a future buyer of your home can "assume" its existing mortgage at whatever the mortgage rate happens to be.
If today's mortgage rates are 4% and rates are ten percent when you sell, instead of applying for a new loan, your buyer can assume your existing 4% FHA mortgage rate instead.
Another FHA loan perk is that FHA mortgage rates don't change with low credit scores, or property type. FHA mortgage rates are the same, no matter whether your score is a 740 or a 580; or, whether you live in a single-family home or a 4-unit.
Everyone gets access to the same FHA mortgage rates.Click to see today's rates (Aug 28th, 2016)
In order to get approved for an FHA loan, your loan size must be within the maximums of what the FHA will insure.
Known as "FHA loan limits", these maximums vary by area, based on local median home values; and, by property type.
FHA loan limits throughout Mississippi and Alabama, for example, are lower than FHA loan limits in the Bay Area of California; and, in Los Angeles and Orange County.
And FHA loan limits on a 2-unit home are higher than the limits on a condo.
There are four tiers of FHA loan limit pricing. There's a standard tier, a mid-range tier, a high-cost tier, and a special exception tier. The majority of the United States is "standard tier".
For 1-unit homes -- properties which include single-family detached homes, town homes, row homes, condominiums, and co-ops -- FHA loan limits now begin at $271,050.
Standard FHA loan limits, like all loan limits, are based on a mathematical formula.
The "floor", which governs FHA loan limits in more than 80 percent of U.S. counties, is equal to 65% exactly of the conforming loan limit of $417,000.
It's used in cities where you can multiply the median home price by 1.15% and the product is less than $271,050.
Areas in which FHA loan limits are $271,050 include Pittsburgh, Pennsylvania; Indianapolis, Indiana; and, Knoxville, Tennessee.
Mid-range FHA loan limits apply to cities where you can multiply the median home price by 1.15% and get a product greater than $271,050. Whatever that product is, so long as it's less than $625,500, is the local FHA loan limit.
Areas in which mid-range FHA loan limits apply include Cincinnati, Ohio; Philadelphia, Pennsylvania; Minneapolis/St Paul, Minnesota; and Boston, Massachusetts.
High-cost FHA loan limits are the maximum insurable FHA loan size -- sometimes called the "ceiling".
High-cost areas are areas in which the median home price multiplied by 1.15% is greater than $625,500. There are approximately 80 of them nationwide.
High-cost areas include Washington, D.C. suburbs Loudoun County, Virginia; and Bethesda and Potomac, Maryland; as well as San Jose, California; and the entire New York City metro area.
The FHA grants "special exception" loan limits for certain parts of Hawaii, Alaska, Guam, and the U.S. Virgin Islands. The elevated loan limits are designed to offset higher construction costs in these states and territories.Click to see today's rates (Aug 28th, 2016)
Among the biggest benefits of using an FHA-backed mortgage is access the agency's designated home loan refinance program - -the FHA Streamline Refinance.
The FHA Streamline Refinance is available to homeowners with an existing FHA mortgage only. It gives homeowners the ability to refinance without having to verify income, credit, or employment.
The FHA Streamline Refinance has just three qualification standards.
First, in order to get qualified, you have to be making your current mortgage payments on time.
The Federal Housing Administration does not extend the FHA Streamline Refinance to homeowners who are behind in their payments, or who have a history of falling behind on the payments.
The FHA wants to see that your last 3 mortgage payments have been paid on-time, and that you've been late on payments no more than one time in the last 12 months.
Second, your current FHA mortgage must be at least 6 months old.
The FHA will verify that you've made at least six payments on your current mortgage before allowing you to use the FHA Streamline Refinance program. Once you've made six payments, you've cleared this hurdle.
And, third, the agency will verify that there's a "benefit" to your refinance.
Known as the Net Tangible Benefit clause, your mortgage payment must reduce 5 percent or more in order to be FHA Streamline Refinance-eligible.
If you meet these requirements, the standard FHA loan limits will not apply.
Homeowners using the FHA Streamline Refinance get access to elevated FHA loan limits which range to $729,750 for a single-unit home; $934,200 for a 2-unit homes; $1,129,250 for a 3-unit home; and $1,403,400 for a 4-unit home.
The FHA Streamline Refinance is among the FHA's most popular programs.
The 2016 FHA loan limits apply to all loans beginning January 1, 2016.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Aug 28th, 2016)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2016 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)