FHA loan limits in 2021
It’s a new year – and that means new limits for certain types of loans.
The Federal Housing Administration (FHA) has increased its base loan limits for 2021 to over $ 24,000 from the 2020 limit of $ 331,760. The increase was driven by a booming real estate market, which at the time. Year-end has seen five straight months of double-digit year-over-year price growth, according to NextAdvisor’s analysis of data from Realtor.com.
Even though the FHA loan limits have increased for 2021, the loan amount is not the only factor that affects your eligibility for an FHA guaranteed mortgage. You will still need to follow FHA and your lender’s guidelines for credit score, debt-to-income ratio (DTI), and down payment.
What is an FHA loan limit?
The FHA loan limits are the maximum amount you can borrow with an FHA backed mortgage. These limits vary by county and are adjusted each year based on the value of the home.
FHA loans are popular with first-time home buyers and can be good options for low- to moderate-income borrowers. “The FHA program has always been, since its inception, to make homeownership more accessible,” says Barry Rothman, housing counseling program manager with the HUD-certified agency. Consolidated credit solutions. Because these home loans are insured by the federal government, they are considered less risky by the lenders. This usually makes FHA loan rate better for homeowners with lower credit scores, compared to mortgage rates.
What are the current limits for FHA loans?
FHA loans can be used to purchase a primary residence, but you are not limited to a single family home. FHA loans can be used to purchase homes up to four units, says Andrina Valdez, Houston chief operating officer. Cornerstone mortgage.
In addition to the location of the property, the number of units will also impact the loan limit. Below standard limit and maximum limit for high cost areas are listed, although some areas of the country have boundaries that fall in between.
| Number of units | 2021 FHA Standard Loan Limit | High Cost Zone 2021 FHA Loan-Limit |
|---|---|---|
| Single parent family | $ 356,362 | $ 822,375 |
| Duplex | $ 456,275 | $ 1,053,000 |
| Triplex | $ 551,500 | $ 1,272,750 |
| Four units | $ 685,400 | $ 1,581,750 |
A handful of states and territories have special limits that can be adjusted up to 150% of the current maximum loan limits. For Alaska, Hawaii, Guam, and the U.S. Virgin Islands, FHA 2021 loan limits may be higher.
| Single parent family | Duplex | Triplex | Four units | |
|---|---|---|---|---|
| FHA 2021 Special Loan Limits | $ 1,223,562 | $ 1,579,500 | $ 1,909,125 | $ 2,372,625 |
You can find the FHA 2021 loan limits for your area by searching for the FHA Mortgage Limits Page.
Factors affecting the FHA limits in 2021
The FHA sets a range of limits each year, which are not the same as the conventional loan limits set by the Federal Housing Finance Agency (FHFA). “The FHA has its own set of limits, and they vary by county and zip code,” says Valdez.
FHA loan limits are based on the median house price in the area and are generally a percentage of the conforming loan limit. The current FHA loan limit for low cost areas is 65% of the conventional limit, which is $ 548,250 for single-unit properties.
How to get an FHA mortgage
The FHA does not issue mortgages directly to consumers. Instead, it insures loans issued by private lenders, and there are other FHA loan terms outside of loan limits. The FHA guidelines include a minimum credit score of 500 if the down payment is 10% or more. For down payments less than 10% and at least 3.5% of the purchase price, the minimum credit score requirement is increased to 580.
While these are the minimum FHA standards, in reality you will need a higher credit score to qualify for an FHA loan. “Lenders have what’s called overlays, their own set of rules that they put in addition to the FHA requirements,” says Rothman. Most lenders will demand a much higher credit score, and the pandemic has only made it harder for borrowers. Last year, we saw the average credit score of FHA borrowers among the 670, according to a December 2020 Report by the Urban Institute.
Given how difficult obtaining a mortgage can be for some borrowers, it’s even more important to shop around. best FHA mortgage lender. If you are having trouble qualifying for an FHA loan right now, use the time to build your credit score and increase your savings. Having a higher credit score and a larger down payment will not only help you get approved for a mortgage, but also increase your chances of receiving a lower interest rate.