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FHA Loan Limits: How Much Can You Borrow?

Updated
Motley Fool Money Staff
Author: Motley Fool Money Staff
Motley Fool Money Staff
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FHA loans are just one of the many mortgage products you can use when purchasing a property. They're guaranteed by the Federal Housing Administration -- a U.S. agency started in 1934 to make homeownership more affordable -- and can be used on single-family homes, as well as two-unit-, three-unit, and four-unit properties (as long as you live in one of the units).

Thanks to the government's guarantee -- meaning the FHA will reimburse the lender if a borrower defaults on their loan -- these mortgages come with low rates and low credit score minimums and require only a minimal down payment.

FHA loans aren't for everyone, though, and there are strict limits on how much you can borrow with these mortgages. If you're interested in using an FHA loan on your next purchase, here's what you need to know about the FHA loan limits in your area.

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How are FHA loan limits determined?

FHA loan limits are based on the conforming loan limit set by the Federal Housing Finance Agency and the median home price in any given area. In low-cost markets, the FHA loan limit is 65% of the conforming loan limit in the county. In higher-cost ones, it's 150%.

Loan limits also vary by property size. One-unit properties, for example, have a smaller loan limit than two-, three-, or four-unit properties. So the highest possible FHA loan limit? You'll see that on four-unit properties in high-cost markets.

What are the FHA loan limits in 2022?

Because home prices are always in flux, FHA mortgage limits -- as well as FHFA conforming loan limits -- are adjusted annually. In both cases, the limits increased in 2022.

This year, the baseline FHA limit on single-family properties is $420,680 for most of the country. The maximum in higher-cost markets is $970,800, a jump from $822,375 the year prior.

Here's a breakdown of these limits by property size and market cost:

NUMBER OF UNITS LOW COST AREA MID RANGE AREA HIGH COST AREA AK, HI, GUAM, & VIRGIN ISLANDS
1 $420,680 $420,681-$970,799 $970,800 $1,456,200
2 $538,650 $538,651-$1,243,049 $1,243,050 $1,864,575
3 $651,050 $651,051-$1,502,474 $809,151-$1,867,274 $2,253,700
4 $809,150 $1,502,475 $1,867,275 $2,800,900

Special lending limits exist for borrowers in Alaska, Hawaii, Guam, and the Virgin Islands due to higher construction costs in these areas. Here's how those limits break down:

  • One-unit properties: $1,456,200
  • Two-unit properties: $1,864,575
  • Three-unit properties: $2,253,700
  • Four-unit properties: $2,800,900

If you want to know the exact FHA loan limits for an area you're considering buying in, your best bet is the FHA's search tool. Just input your state, county, and limit type, and you'll see the loan limits for that area in seconds.

You might not qualify for the maximum loan amount

The FHA loan limits are just one part of the equation. In other words, just because the FHA is willing to guarantee a $1.5 million-dollar home loan in your area doesn't necessarily mean that you can qualify to borrow that much.

Lenders consider a few different factors when determining how much you can borrow, with debt-to-income ratio, or DTI, being chief among them. This is your monthly debt obligations divided by your pre-tax monthly income, expressed as a percentage. For example, if your monthly payment obligations are $2,000 per month and you earn $5,000, your DTI is 40%.

Your DTI -- and thus the maximum loan limit -- will be influenced by the following factors:

  • Your income.
  • The interest rate on your FHA loan.
  • Your expected property taxes, insurance, and homeowners association (HOA) fees on your new home.
  • Your lender's maximum DTI ratio (which may be lower than the maximum allowed by the FHA).
  • The FHA home loan limit in your area.

Keep in mind that there are two types of DTI ratios. The front-end DTI is the percentage of your income that will go toward your mortgage payment. The back-end DTI is the percentage of your income that will go toward all of your monthly obligations, including your mortgage payment.

While many lenders have front-end DTI maximums for FHA loans, the back-end DTI ratio is the more important of the two when it comes to loan approval, so expect a lender to look at your other debt payment obligations closely.

The standard FHA back-end DTI maximum is 43%, but it can go higher if you have what the agency calls "compensating factors." This might include a very large down payment, a flush savings account, or a very good credit score.

Top Mortgage Lender

It's important to consider multiple mortgage lenders to find a good fit for you. We've listed one of our favorite lenders below so you can compare your options:

Lender Min. Down Payment Credit Score Next Steps
  • 0% - 3.5%
  • 580
Circle with letter I in it. 580 FHA 620 Conventional and VA 700 Jumbo
Apply Now for Better

Other FHA requirements

Aside from your DTI, there are other requirements you'll need to meet to qualify for an FHA mortgage loan. Here's a look at the agency's current loan standards:

DOWN PAYMENT 3.5% to 10%, depending on credit score
CREDIT SCORE 500-plus, depending on down payment
RESIDENCY Citizens, lawful residents
OCCUPANCY Borrower must occupy the property as their primary residence for the majority of the calendar year
PROPERTY Must be one to four unitsMust meet HUD's minimum property standardsMust undergo an FHA appraisal
Data source: HUD.

FHA loans also require a Mortgage Insurance Premium, which you'll pay at closing and across the life of your loan. Up front, the cost is 1.75% of the loan amount. Annually, your MIP costs will depend on your loan amount and down payment.

The bottom line

FHA loan limits change annually, so if you're interested in using these low-cost loans for your next investment, make sure you're up to date on the latest numbers. For more information on FHA loans, see our FHA loan guide and check out our best FHA lenders.