First-time homebuyers considering an FHA home loan have plenty of questions, including one of the all-time most popular early inquiries: “How much can I borrow?” If you have done some Internet research on FHA loan limits in the past, check again—some reports are now out of date because of recent changes to the rules for FHA lending limits.

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What are the FHA Loan Limits?

First-time homebuyers considering an FHA home loan have plenty of questions, including one of the all-time most popular early inquiries: “How much can I borrow?” If you have done some Internet research on FHA loan limits in the past, check again—some reports are now out of date because of recent changes to the rules for FHA lending limits.

In 2008, FHA loan limits were temporarily raised --the loan limits went up in reaction to the housing crisis. According to the FHA, those temporary higher rates were intended to help bring economic stability in one of the darkest periods in the history of the housing market.

Those rates did not last. On 1 January 2009, FHA and the Department of Housing and Urban Development (HUD) enacted new rates designed to be permanent unless the FHA issues new guidelines at a later date. These new rates were put into law as prescribed by the Housing and Economic Recovery Act of 2008.

THE NEW PERMANENT FHA LOAN LIMITS

According to FHA.gov, the new FHA mortgage loan limits are tied to a house price index set by the Federal Housing Finance Agency. That doesn’t tell the average homebuyer much about what they’ll get with an FHA guaranteed home loan, but there are some simple things to remember that can help you understand how FHA loan limits work.

FHA LOAN LIMITS VARY DEPENDING ON WHERE YOU LIVE

FHA lending limits are set by region, and depending on where you new home is located your loan limits may fall between a minimum of $271,050 (where housing costs are low) and a maximum of $625,500 (in the most expensive areas). These limits apply to all FHA loans for single family, owner-occupied houses or condominiums. The new FHA home mortgage limits don’t apply just to first-time homebuyers; the new limits also apply to products including FHA-insured reverse mortgages.

FHA loan limits are determined by county. You can look up the FHA lending limits for your specific area online or talk to your lending officer to learn the amounts set for your area in 2009.

A NOT SO GRAY AREA

While it’s true that the county determines the lending minimums and maximums, there is an exception to part of the “by-county” rule. If an FHA insured loan is issued for a home located in a “metropolitan statistical area,” the limit is set by the county with the highest home price in the metro area. That’s good news for home buyers who could use the extra FHA loan limit compared to the lower-priced county in the general area.

Know the rules and requirements for the specific FHA loan you want to apply for. Some borrowers make it all the way through the application process before learning that their particular situation makes one kind of FHA loan wrong for them.
For example, did you know you can’t apply for an FHA mortgage for a home purchase if you have an existing FHA loan? This does not apply to FHA refinancing loans, but it’s an important consideration. You will also need to meet income requirements; did you know there are maximum income requirements for FHA mortgages? If you make too much, you may need to look for a conventional loan.
The minimum and maximum FHA guaranteed mortgage amount for your area is an important piece of data to have while shopping for a new home; know how much you are approved to borrow–it will save lots of time when you’re searching for houses in your price range.