Mortgage Daily

Published On: December 15, 2022

FHA Loan Limitations Increase by $65,000 in 2022

In 2022, FHA loan limitations will increase. The new basic limit, applicable to most single-family houses, will be $420,680.

This is a roughly $65,000 increase from the previous year’s FHA loan ceiling of $356,360.

The Federal Housing Administration is increasing its maximum loan amounts to keep up with rising housing prices.

With these increased limitations, FHA-financed borrowers will have access to a wider variety of houses.

How Much Can You Borrow With an FHA Loan?

In general, the maximum loan amount for an FHA loan is $420,680. This applies to single-family residences, with restrictions increasing for properties with two, three, or four units and counties with higher housing costs.

The maximum FHA loan amount for a single-family home in an expensive location is $970,800. In addition, a four-unit home costs about $2 million.

Remember that not all borrowers are eligible for the maximum FHA loan amount. The maximum amount you may borrow will depend on criteria such as your credit score, debt-to-income ratio, and amount of down payment.

FHA Loan Limitations for 2022

FHA loan limitations determine the maximum amount borrowed on an FHA-insured mortgage. This maximum will increase to $420,680 on January 1, 2022, for a single-family house in most of the country.

The maximum loan amount for a single-family home is $970,800 in the most costly metropolitan regions where FHA loans are available.

According to FHA criteria, a low-cost neighborhood is one in which the median house price multiplied by 115% is less than $420,680.

Likewise, a high-cost location is one in which the median house price multiplied by 115% exceeds $420,680. In these localities, the maximum price for a single-family residence is $970,800.

There are 65 counties in the United States where house values are high enough to qualify for the maximum FHA loan limit.

There are also special exemption loan restrictions in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In certain places, FHA limits loans for single-family homes to a staggering $1,456,200.

The increased loan restrictions in Alaska, Hawaii, Guam, and the Virgin Islands are intended to “allow for greater construction expenses,” according to the FHA.

FHA Limitations on Multifamily Loans

The Federal Housing Administration also guarantees mortgages on homes with two, three, and four units. These properties have more significant borrowing limitations than single-family houses.

Even though FHA accepts multifamily house loans, the property must still qualify as a “principal residence.” That implies the buyer must reside full-time in one of the properties.

Thus, an FHA loan cannot be utilized to acquire an investment property. However, you may use an FHA loan to purchase a house with two to four units, live in one, and rent out the rest.

Thus, it is feasible to obtain a multifamily loan of up to $1.9 million with a 3.5% down payment and a low-interest FHA loan.

About 2022 FHA Loan Limitations

To qualify for an FHA loan, your mortgage must not exceed the maximum loan amount insured by the FHA. These maximums, known as “FHA loan limitations,” vary by county.

In 2022, the Department of Housing and Urban Development (HUD) will raise FHA lending restrictions in 3,188 counties while maintaining them in 45 counties.

FHA loan limitations include four distinct pricing tiers: regular, mid-range, high-cost, and special exemption.

Single-family FHA loan restrictions are now set at $420,680 in low-cost areas.

In areas with high housing costs, the FHA single-family loan ceiling is $970,800.

Nevertheless, many counties lie midway between the minimum and maximum limitations.

Using this search engine, you may determine your local FHA loan limitations.

What Do FHA Loans Entail?

The FHA loan is a mortgage designed to assist purchasers with lower incomes and credit scores in becoming homeowners.

With looser eligibility requirements, the FHA program makes it simpler to qualify for a mortgage, even if your financial situation is less than ideal.

Depending on the mortgage provider, specific regulations may differ. However, you may often qualify for an FHA loan if you have the following:

  • A credit score of at least 580
  • A down payment of at least 3.5%
  • A debt-to-income ratio of less than 45%
  • Stable earnings and work
  • A two-year work history

Noting that the Federal Housing Administration is not a lender is essential. Therefore, you would not “go to” the FHA to obtain a mortgage loan.

Instead, the FHA insures, and conventional lenders sell these mortgages. Thus, you might obtain an FHA loan from most banks, lenders, and credit unions.

FHA vs. Conventional Loan Limitations

Conforming loan restrictions are closely related to FHA mortgage limits.

The Federal Housing Finance Agency (FHFA) revises its house price index annually. This is used to establish both conforming and FHA loan limitations. However, each is computed differently.

Conforming loans adhere to Fannie Mae and Freddie Mac’s criteria and have more significant lending limitations than FHA mortgages.

Consider, for instance, the conventional single-family loan limitations for 2022.

  • Standard FHA loan limits are $420,680.
  • The conventional loan ceiling is $647,200, which is $226,520 more than the FHA limit.

However, only some are eligible for traditional mortgages with more significant loan amounts.

Conforming loans backed by Fannie Mae and Freddie Mac demand a minimum credit score of 620. And borrowers with poor credit demand higher interest rates and pricey private mortgage insurance (PMI).

Despite having lower loan limits, FHA loans are usually more appealing to consumers with average credit.

It is possible to obtain FHA financing with a credit score as low as 580, and a low score will not result in a high-interest rate.

The FHA does charge a separate cost for mortgage insurance. For borrowers with poor credit and a small down payment, this option may be more inexpensive than typical PMI.

FHA Streamline Refinance Loan Limitations

One advantage of an FHA loan is the ability to refinance under the FHA Streamline Refinance program.

The FHA Streamline loan is a low-documentation loan that allows homeowners to refinance without verifying income, credit, or employment.

The new loan amount must be within the local FHA lending restrictions when refinancing under the FHA Streamline program. However, this will not be a problem.

Because the FHA Streamline may only be utilized on an existing FHA loan and cash-out is not permitted, you will not be able to raise your loan balance above the current FHA mortgage restrictions.

Other FHA Streamline Refinance criteria include:

  • You must make current mortgage payments on schedule.
  • Your existing FHA loan must be at least six months old.
  • The agency will verify that your refinancing is financially beneficial. The Net Tangible Benefit clause requires that your “combined rate” (interest + mortgage insurance) decrease by at least 0.5%.

If you fulfill these requirements, the FHA Streamline program is an excellent method to refinance into today’s ultra-low mortgage rates and reduce your monthly payment.

Current FHA Mortgage Rates

FHA mortgages ride the trend of low-interest rates. With mortgage rates at all-time lows and rising loan ceilings, now is a great time to seek FHA financing. Consult with a lender to see how much property you can buy based on the FHA loan restrictions for 2022.

 

 

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