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FHA Loan Limits Updated for 2018

 

Home prices are trending upward across the country. If you’re lucky enough to be independently wealthy, you might be able to buy your home with cash, but most people will have to get a mortgage.

 

If you’re buying a home with a mortgage, every program has an upper limit on the amount you can qualify for before it’s considered a jumbo mortgage. If you’re looking to qualify for a Federal Housing Administration (FHA) loan, the FHA recently announced new loan limits for 2018. If you’re in the market for a mortgage, your limits are most likely going up. In this post, we’ll go over how FHA loan limits are set, how to calculate or find the limit in your area and also cover the impact on FHA insured reverse mortgages.

How FHA Loan Limits Are Set

For conventional loans backed by Fannie Mae and Freddie Mac, there’s a standard loan limit of $453,100 for conforming loans (up to $679,650 in high-cost areas). Anything above that is considered a jumbo loan. The VA follows the same loan limit guidelines, but FHA loan limits are a little more complex.

FHA loan limits, which are based on home prices in your county, are generally calculated by taking 115% of your area’s median home value. The law requires that local loan limits be no lower than 65% of the current national conforming loan limit, which is $294,515 this year, up from $275,665 in 2017.

On the other end, this year’s ceiling for conforming FHA loans in the highest cost areas is $679,650, which is up from $636,150 last year. This figure represents 150 percent of the national conforming loan limit.

According to HousingWire, loan limits increased in 3,011 counties across the U.S., leaving just 223 counties with unchanging limits.

This leads to a couple of great things. Purchasers have increased buying power on the market. In addition, if you’re a homeowner who is looking to access their equity by taking cash out, you may be able to take out more cash based on what your home is worth and the new limits.

How to Find Your Limit

The Department of Housing and Urban Development (HUD) has a search engine that can help you figure out what the limit is in your area. You can search the limits based on your county or metropolitan statistical area (often defined by the nearest urban area, like Detroit or Grand Rapids). In addition to finding the FHA limit, the search engine has a couple of other neat features for home buyers.

The table that comes up in the search results will show you the median sale price for the area you searched on, which can help you compare the affordability of different areas at a glance. Of course, this is only a very broad first look. There are typically many counties around a big city with different areas that have varying price ranges for homes.

In addition to finding the limits on FHA loans, you can use the engine to find the local limits on Fannie Mae and Freddie Mac loans (and by extension, VA loans).

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