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Home / Blog / FHA Loans / FHA Raises 2021 Loan Limits Almost $25,000

FHA Raises 2021 Loan Limits Almost $25,000

January 12, 2021 By Admin

5_Recent_FHA_Changes_That_May_Affect_Borrowers_Ability_to_Qualify_for_an_FHA_LoanAs of the beginning of 2021, higher loan limits made it easier for homebuyers to get an FHA mortgage. The loan limits allowed by the FHA have a significant impact on the housing market and how home buyers approach financing a property. For example, in the first quarter of 2020, the Federal Housing Authority (FHA) loans made up 20.4% of new home sales.

2021 FHA Mortgage Limit Increased

In 2021, the FHA cited robust housing appreciations as the reason for a 7.42% average increase in the FHA loan limit.

The floor limit for single-family homes increased from $331,760 to $356,362. In high-cost areas, the ceiling limit increased from $765,600 to $822,375. The loan limit did not change in 125 counties across the country. No counties saw an FHA limit decrease in 2021.

The national FHA floor limit is set to increase by around $25,000.

Related: FHA vs. Conventional Loan

What Are FHA Loan Limits?

The Federal Housing Authority insures an FHA loan. In addition, a variety of banks and other institutions provide FHA loans. As a result, the lender can offer the loan with more confidence knowing that the FHA backs the loan.

However, the FHA limits how much they are willing to guarantee. These loan limits are based on the area where the borrower is buying and the property type. For example, a single-family home in a rural area will likely have a lower limit than a city apartment.

The FHA has a “floor,” the lending limit for lower-cost areas, and a “ceiling,” which is the lending limit for high-cost areas.

How Do the FHA Set Loan Limits?

The FHA looks at every county’s home values and market activity to set the FHA mortgage limits. As a result, one county may have a different limit than another county in another country.

The price to purchase a home and the market demand impact the FHA limit in the county. In addition, the FHA adjusts both the floor and ceiling limits each year as needed. Therefore, the limitations do not always go up — in some years, a county may see a decrease in the FHA mortgage limit.

The FHA is required by the National Housing Act (NHA), amended in 2008 by the Housing and Economic Recovery Act (HERA), to set the limit at 115% of area median house prices, subject to floor and ceiling amounts.

The floor limit applies in areas where 115% of the median house price is below the floor limit. In addition, the floor limit must be 65% of the national conforming loan limit for Freddie Mac and Fannie Mae mortgages. The ceiling is 150% of that same national limit.

2021 is a Great Time to Buy a Home

2021 could be an excellent year to purchase a home because of the historically low-interest rates and higher limits on FHA home loans. Buyers can lock in affordable payments on a new home and enjoy their property for years.

Marimark Mortgage

Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.

We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing to help clients lower their monthly mortgage payments.

To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us directly.

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Filed Under: FHA Loans

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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