New FHA Loan Limits for 2023
Did you know that FHA loans limit how much money you can borrow? If you’re considering applying for an FHA loan, you’re probably wondering, “What are the new FHA loan limits for 2023?”
Keep reading to discover everything you need to know about FHA loan limits and how they change yearly.
What Is the FHA Loan Limit?
The FHA loan limit is the maximum amount of money you can borrow when you purchase a home using money backed by the Federal Housing Administration (FHA). You still work with a mortgage company when using an FHA loan, but because the government supports the loan, it involves less risk for the lender.
FHA loan amount limits differ every year depending on several factors. Compared to the FHA loan limits in 2022, the new 2023 limits are much higher.
How Does the FHA Loan Limit Work?
While loan limits indicate the maximum FHA loan you can borrow, the amount you qualify for is based on your credit score, down payment, employment history, income, and other factors. As a result, you might receive a loan significantly less than the area’s maximum.
The FHA conforming loan limits in 2022 were much lower than in 2023, which saw a $51,000 increase in the FHA maximum. While the FHA gives standard maximums, counties and certain states can have different limits. For example, because of increased construction costs, Alaska, Hawaii, Gaum, and the US Virgin Islands have considerably higher maximums.
The standard maximum only applies to single-family homes. Other property types have increased loan limits.
FHA 203(k) loan limits
If you’re applying for an FHA 203(k), experts will base it on how much value your renovation adds to your home. If the home you’re purchasing requires significant improvements before you can inhabit it, consider a 203(k) loan.
New FHA Loan Limits for 2023
If you’re wondering, “Will FHA loan limits increase in 2023?” the answer is they already have. The new FHA loan limits for 2023 went into effect on January 1st.
What are the current FHA loan limits? For single-family homes in an average-priced market, the maximum FHA loan is $472,030. In 2022, it was $420,680. For pricier locations, the limit is $1,089,300.
In Alaska, Hawaii, Guam, and the US Virgin Islands, the maximum is $1,633,950.
What Factors Affect FHA Loan Limits in 2023?
The following three factors determine your FHA loan limit for 2023.
Location
Loan maximums vary by state and county depending on indicators like average home value and construction cost. You may benefit from higher loan limits if you’re willing to move to another county within your state. A mortgage professional can give you exact numbers for each area.
Property Type
The standard limits for FHA loans apply to single-family homes. If you’re looking to buy a multi-family home, the maximum increases based on the number of units on the property. You cannot use FHA loans to buy a property with more than four units, and you must use one of the units as your primary residence.
Market Factors
To determine whether a county is a high- or low-cost area, the FHA looks at the county’s median housing costs over the last four quarters. The administration uses the one with the highest median price for counties centered around a Metropolitan Statistical Area. The closer you live to an urban area, the more likely you are to find a higher loan limit.
How Are FHA Loan Limits Determined?
The US Department of Housing and Urban Development calculates FHA loan income limits based on 65% of the new conforming loan limits. A conforming loan has three criteria:
- It’s not secured by the federal government.
- It follows limits set at the local level.
- It follows Freddie Mac’s and Fanny Mae’s requirements of a 620 credit score, a low debt-to-income ratio, a down payment of at least 3%, and two years of employment.
A high-cost area is one in which the average home price is at least 115% more than the maximum loan limit in a standard-priced county ($472,030). Only 65 counties in the lower 48 states qualify as high-cost areas.
How Much Can You Borrow With an FHA Loan?
The amount you can borrow with an FHA loan depends on the area’s loan limits and your situation. Generally, you can expect your area’s limit to be $472,030. If you have excellent credit, a large down payment, and are buying a home with a high appraisal, you can expect to get the maximum loan possible.
High-cost areas in the lower 48 states include counties around coastal California from San Diego through San Francisco, Seattle, Salt Lake City, Denver, Nashville, Washington, DC, New York City, and Boston.
If you want to purchase a four-unit property in a high-cost area, you could receive a loan of up to $2,095,200.
The Appeals Process
One little-known fact about FHA loan limits is that you can appeal the limit for your area. If HUD doesn’t have much data about your county, you can contact the department before the end of the calendar year.
Bottom Line
Now that you know the new FHA loan limits for 2023, you can start shopping for a house. Are you wondering about your county’s 2023 FHA loan limits in Texas? Champions Mortgage can give you details concerning how much you’re eligible to borrow.
Call us at (281) 727-2500 to start the process today!
