FHA Loan Limits
The loan limit is the maximum loan amount you can borrow with a mortgage loan.
FHA loans have lower loan limits than conventional loans, the limit will depend on the state and county you reside in.
2021 FHA Loan Limits
Search for the loan limit in your county on the HUD website.
Getting Approved for a Higher Loan Amount
If you’re needing a higher loan amount than the FHA allows you will need to get a conforming mortgage.
Conforming loans have higher loan limits, especially in low-cost areas where the FHA limit is $331,760, the conventional loan limit in low-cost areas is $510,400, almost $180,000 higher maximum loan limit than FHA.
Maximum Loan Limits by Loan Type
Conventional loans are referred to as conforming loans because they meet the requirements of Fannie Mae and Freddie Mac.
A conventional mortgage has a higher credit score and down payment requirements but does have significantly higher maximum loan amounts than government-backed home loans.
If you need a loan amount that exceeds the conventional loan limits you will need a jumbo loan. Jumbo loans are non-conforming home loans that require at least 20% down and a 700 credit score.
2021 Conventional Loan Limits
VA home loans are for veterans of the US military and their spouses. They come with a zero down payment and no mortgage insurance. Previously the loan limit for VA loans was $453,100, however, as of 2020, there is no longer a VA loan limit.
The U.S. Department of Agriculture guarantees USDA home loans for low-to-median income borrowers in rural areas of the country. Because of the strict income limits, there is no USDA loan limit, your debt-to-income ratio determines the maximum loan amount you qualify for.
How Lenders Calculate Your Maximum Loan Amount
Mortgage lenders use several different factors to determine the loan amount you’re approved for. Your credit score, DTI ratio, and down payment all play a factor.
Your credit score has a direct effect on the interest rate you receive on a home loan. A lower mortgage rate means lower payments which means you can finance a higher loan amount.
Your debt-to-income ratio is the amount of your monthly debt obligation payments compared to your monthly income.
Example: Your total debt payments for your auto loan and credit cards is $1,000 per month. Your income is $5,000 per month. Your DTI ratio is 20% before factoring in your mortgage payment, this is called your front-end DTI ratio.
The maximum DTI ratio allowed on FHA loans is 43%-50% depending on the lender and other aspects of your loan application.
What are FHA Loans?
The Federal Housing Administration was created by the Government to increase homeownership in America. An FHA mortgage is easier to qualify for because they have more flexible guidelines than traditional loans making them a favorite of first-time homebuyers.
The FHA loan program does not issue the loans, they insure them. Private lenders who become an FHA-approved lender issue the loans and the Federal Housing Administration insures it in the event the borrower defaults on the mortgage.
FHA Loan Limits
- 580 credit score with 3.5% down
- 500-579 score with 10% down
- Maximum 50% debt-to-income ratio
- Two years of stable employment and income history
- For primary residence only
- 24 month waiting period after a foreclosure or bankruptcy
- 1% of student loan debt added to DTI ratio
FHA home loans do require mortgage insurance premiums (MIP) which help fund the FHA mortgage program. The mortgage insurance fee is 0.85% of the loan amount. The amount can be lower or higher depending on the amount of down payment and loan amount.
You can qualify for an FHA mortgage with a 500 credit score with a 10% down payment. However, getting approved for a loan with a score in this range is often very difficult. It is recommended that you work on improving your credit score before applying for a mortgage.
If you have a 580 credit score then you will qualify for an FHA mortgage loan with a 3.5% down payment. These loans are great because they allow your down payment to be a gift from a friend or family member. An FHA mortgage also has lower interest rates than conventional loans.