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FHA Maximum Mortgage Limit

by K.C. Hernandez

Location, location, location! The geographical area of the property you buy or refinance with a Federal Housing Administration loan affects the amount you can borrow on a mortgage. The FHA sets maximum mortgage limits based on the median sale price in a given area. The limit amount also depends on property type. For example, a one-unit property in an expensive county is subject to higher loan limits than a four-unit property in a low-cost area.

The Basics

Lenders approved to work with the FHA fund loans that the agency insures. The government guarantees repayment to the lender if a borrower defaults, allowing lenders to finance borrowers who might otherwise have trouble getting a loan under conventional terms. Eligible property types include one- to four-unit dwellings used as primary residences. The FHA's liberal credit and down payment guidelines and its maximum mortgage limits help make the program available for borrowers of modest means.

Low-Cost Floors

Most counties fall within the FHA's low-cost limits known as "floors." The agency uses a specific formula to set the floor limit. Fannie Mae and Freddie Mac, government-sponsored enterprises that buy and sell a majority of conventional mortgages, set the conforming loan limit annually. As of 2013, the FHA's "floor" is 65 percent of the $417,000 national conforming loan limit. The FHA's floor limits are: $271,050 for one-unit properties; $347,000 for two units; $419,425 for three units and $521,250 for four-unit properties.

High-Cost Ceilings

The highest maximum limits, known as "ceilings," apply to high-cost counties. An area in which the loan limit exceeds the “floor” limit is considered a high cost area, according to HUD. The “ceiling” is set at 150 percent of the conforming loan limit. The FHA's high-cost area "ceilings" are as follows: $625,500 for one unit; $800,775 for two units; $967,950 for three units and $1,202,925 for four-unit properties.

Considerations

Maximum mortgage limits for Alaska, Hawaii, Guam and the Virgin Islands exceed high-cost ceilings of the continental US due to the elevated cost of construction, according to HUD. A special exception is made for these areas, making the limits 150 percent of the FHA's "ceilings." The limits are as follows: $938,250 for one-unit homes; $1,201,150 for two units; $1,451,925 for three units and $1,804,375 for four units.

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