FHA loan limits rise by over $50K
FHA loan limits are increasing in 2023. The new baseline limit — which applies to most single-family homes — will be $472,030. That’s an increase of more than $51,000 over last year’s FHA loan limit of $420,680.
Caps are even higher in areas with expensive real estate, where FHA loan limits will now reach above $1 million.
The Federal Housing Administration is raising its lending limits to keep pace with home price inflation. With these higher limits, borrowers have access to a wider range of homes using affordable FHA financing.
In this article (Skip to…)
- Max FHA loan amount
- 2023 FHA limits
- About FHA loan limits
- How FHA loans work
- FHA vs. conventional
- FHA Streamline Refi
- Today’s FHA loan rates
What’s the most you can borrow with an FHA loan?
FHA loan limits dictate the maximum amount you can borrow on an FHA-backed home loan.
Starting January 1, 2023, the new FHA loan limit will be $472,030 for a single-family home in most parts of the country. Limits increase for 2-, 3-, and 4-unit properties.
FHA borrowers can also get bigger loans in high-cost areas.
The maximum FHA loan limit for a 1-unit property in a high-cost county is $1,089,300. And there are “special exception” loan limits in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, FHA caps single-family home loans at a surprising $1,633,950.
Keep in mind that not every borrower will qualify for the maximum FHA loan amount. The most you can borrow will depend on factors like your credit score, debt-to-income ratio, and down payment amount.
FHA loan limits for 2023
On January 1, 2023, the Department of Housing and Urban Development (HUD) is increasing FHA loan limits in 3,222 counties while just 12 counties will remain the same.
Following is a complete list of the new FHA loan limits for 2023. You can look up your local FHA loan limits using this search tool.
|Property Size||Low-Cost Area||High-Cost Area||Alaska, Hawaii, Guam, U.S. Virgin Islands1|
1Mortgage limits for the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands are adjusted by FHA to account for higher costs of construction. Source: HUD.gov
How FHA loan limits are determined
FHA loan limits are based on the Federal Housing Finance Agency’s conforming loan limits. Each year, FHA limits are set at 65% of the new conforming loan limits.
There’s not just one FHA loan limit. Rather, borrowers can access a wide range of loan sizes depending on the type of property they’re buying and where it’s located.
FHA has a baseline limit for single-family homes and increased limits for 2-,3-, and 4-unit buildings. In addition, extended loan limits are available in counties with high real estate prices.
According to FHA’s guidelines, a low-cost area is one where you can multiply the median home price by 115% and the product is less than $472,030. Similarly, a high-cost area is one where the median home price multiplied by 115% is greater than $472,030.
There are just 65 U.S. counties with home prices high enough to qualify for FHA’s maximum loan limit. Many counties have loan limits that fall somewhere between FHA’s “floor” and “ceiling.”
In Alaska, Hawaii, Guam, and the U.S. Virgin Islands, home buyers can borrow even more than the FHA’s high-cost loan amount. In these areas, the ceiling is a whopping $1,633,950 for 1-unit properties and up to $3,142,800 for a four-unit home.
FHA says the higher loan limits in Alaska, Hawaii, Guam, and the Virgin Islands are meant to “account for higher costs of construction.”
FHA multifamily loan limits
The Federal Housing Administration backs mortgages on 2-, 3-, and 4-unit properties. These types of homes have higher loan limits than single-family residences.
Although FHA allows multifamily home loans, the property must still be considered a “primary residence.” That means the home buyer needs to live in one of the units full time.
In other words, an FHA loan cannot be used to purchase an investment property or vacation home. However, you can use an FHA mortgage to purchase a 2-4-unit property, live in one unit, and rent out the others.
In this way it’s possible to get a multifamily loan of over $2 million with an affordable FHA loan and just 3.5% down payment.
How does an FHA loan work?
The FHA loan is a type of mortgage meant to help lower-income and/or lower-credit buyers become homeowners.
With looser eligibility standards, the FHA program makes it easier to qualify for a mortgage even if your finances aren’t perfect.
Exact rules can vary by mortgage lender. But you can typically qualify for an FHA loan with:
- A credit score of 580 or higher
- A down payment of 3.5% or more
- A debt-to-income ratio of 45% or less
- Stable income and employment
- A two-year employment history
It’s important to note that the Federal Housing Administration is not a lender. So you wouldn’t go “to” the FHA to get a mortgage loan. Rather, the FHA insures these mortgages and mainstream lenders offer them. So you could get an FHA loan from most any bank, lender, or credit union.
FHA vs. conforming loan limits
FHA mortgage limits are closely tied to conforming loan limits.
Every year, the Federal Housing Finance Agency (FHFA) updates its home price index. This is used to set both conforming loan limits and FHA loan limits. But the two are calculated differently.
Conforming loans — which follow guidelines set by Fannie Mae and Freddie Mac — have higher loan limits than FHA mortgages.
For example, look at the standard, single-family loan limits for 2023.
- FHA’s standard loan limit is $472,030
- The standard conventional loan limit is $726,200 — a full $254,000 higher than FHA
However, not everyone can qualify for higher loan amounts via a conventional mortgage.
Fannie Mae and Freddie Mac require a minimum credit score of 620 for a conforming loan. And for borrowers with credit on the lower end of the spectrum, they charge higher rates and expensive private mortgage insurance (PMI).
FHA loans are often more attractive for borrowers with fair credit despite having lower loan limits. It’s possible to qualify for FHA financing with a credit score as low as 580, and a low score won’t force you into a high interest rate.
The FHA does charge its own mortgage insurance premium. But this can be more affordable than conventional loan PMI for borrowers with low credit and a small down payment.
FHA Streamline Refinance loan limits
One perk of having an FHA loan is that you can refinance using the FHA Streamline Refinance program.
The FHA Streamline is a low-doc loan that gives homeowners the ability to refinance without having to verify income, credit, or employment.
When you refinance via the FHA Streamline program, your new loan must be within local FHA loan limits. But this will not be an issue.
Since the FHA Streamline can only be used on an existing FHA loan — and no cash-out is allowed — you won’t be able to increase your loan balance above current FHA mortgage limits.
Other requirements for the FHA Streamline Refinance include:
- You must be making your current mortgage payments on time
- Your current FHA mortgage must be at least 6 months old
- The agency will verify that there’s a financial benefit to your refinance. Known as the Net Tangible Benefit clause, your “combined rate” (interest plus mortgage insurance) must drop by at least 0.5%
If you meet these guidelines, the FHA Streamline is a great way to refinance into today’s ultra-low mortgage rates and lower your monthly payment.
Today’s FHA loan rates
FHA loan rates have risen from their all-time lows, alongside conventional and VA loan rates. But borrowers can almost always find a better deal by shopping around.
Compare rates from at least three FHA-approved lenders to find your lowest available rate. A little work could lead to big long-term savings. Ready to get started?