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FHA Loan Limits

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Photo by Scott Graham on Unsplash
Josh Rapaport
January 27, 2023

FHA loans are ideal for first time home buyers looking for a loan that doesn’t require a massive down payment or perfect credit. This makes it easy for struggling homeowners to access the loan, regardless of their current financial state.

In this article, we provide you with more insight into FHA loan limits and tell you what to do to qualify for the loan. Keep reading to gain more insight.

How are FHA Loan Limits Set?

What determines the maximum FHA loan limit? This type of loan is highly recommended if you have a low credit score and want to start with a low down payment.

However, you can still consider looking for FHA jumbo loan limits if you want to purchase an expensive home. District Lending can also help you make the home-buying process easier if you want an expensive home.

When it comes to FHA loans, things are always different. There is always a ceiling and a minimum amount you can qualify for. They are usually determined by two factors, which are;

  • Location: The FHA county loan limits usually differ. The lender will check the area you live in before issuing you a loan. This is because there are low-cost areas and high-cost areas. For example, if you want to buy a house in California, Los Angeles county, you will get a higher amount than someone who wants a house in California, Solano county.
  • The Number of Units You Want to Purchase: The number of units for purchase is also used to set FHA loan limits. If you want a 3-unit property, you may get a higher amount than someone buying a 1-unit home.

The Lending Limits for FHA Loans

What is an FHA loan limit? FHA lending loan limit is the maximum or minimum amount of money that will be insured to a home buyer. These limits are usually updated and adjusted annually and can be affected by the conventional limits set by the Fannie Mae and Freddie Mac corporations.

FHA loan cap 2021 for the high-cost areas was $822,375, but that was updated earlier this year to $970 800. On the other hand, the FHA loan limit set for low-cost areas was adjusted to $420,680 in 2022. Here is a simple table that will help you understand how much you can qualify for regarding the unit you are purchasing;

Size of Unit for PurchaseSingle UnitDuplex UnitTri-Plex UnitFour-Plex Unit
FHA Limits (Low-Cost Areas)$420,680$538,650$651,050$809,150
FHA Limits (High-Cost Areas)$970,800$1,243,050$1,502,475$1,867,275

Remember, the FHA multifamily loan limits will also differ depending on the location you live in or plan to purchase a home. As you can see from the table above, FHA maximum loan amount 2022 is $1.867,275, but this does not mean that it is the exact amount you will get when you apply for the loan.

If you come from a place where houses exceed that amount, you will be considered for a higher loan limit. For example, in Alaska, Guam, Hawaii, and Virginia Islands, the loan limit for a four-unit property can go up to $2,372,625. The loan limits indicated above are for most states and counties in the United States.

Why Are FHA Limits Necessary?

The FHA loan limits are necessary because they provide a means of preventing the over-concentration of lending. This is important because an over-concentration of lending leads to bubbles, which can cause severe economic damage.

The limits are also necessary because they provide a minimum standard for mortgage lenders to follow when approving home loans. In other words, it buffers the lenders and borrowers, ensuring lenders do not offer more than is needed. It also prevents borrowers from borrowing more than they can afford.

This prevents borrowers from over-leveraging their homes and creating financial problems down the road. If they cannot make payments on time or can’t afford the monthly payment after interest rates rise, it can be a problem for both the lender and borrower.

Another thing worth noting is that the Federal Housing Administration set the loan limits to prevent banks from boosting interest rates on their loans above what they would typically charge. The idea was to ensure that low-income home buyers afford their homes without struggling to pay interest rates.

FHA Loan Requirements

Qualifying for reasonable FHA mortgage limits is easy, but you must meet the following conditions to get approved;

  • Credit Score: FHA requires a credit score of 580 and above to qualify for the mortgage. You can still be considered if you have a lower credit score, but you will have to start with a down payment of 10%. District Lending is another alternative if you want to begin with a low down payment with fixed or adjustable interest rate terms.
  • Income Report: The FHA lender will also ask for your income report. It should be consistent and well-updated. This helps the lender determine if you will manage to pay the interest rate and loan on time.
  • Down Payment: Many loaning organizations usually ask for a down payment before issuing you a loan. Therefore, you should be prepared with a down payment if you want an FHA loan. The good thing is that their down payment is low, and it is easy for any potential home buyer to afford. 3.5% of the amount you request is what you will need to pay first. But if you have a credit History: Your credit history is also important. You must wait for at least two years to apply for an FHA loan if you have been bankrupt. Also, if you have ever been through a foreclosure, you must apply for an FHA loan after three years.
  • Debt-to-Income Ratio: Your DIT should be less than 43%. Anything above 50% will disqualify you from an FHA loan.
  • Occupancy: To qualify for an FHA loan, you must ensure that you’ve stayed in the property for at least one year. If you plan to purchase a new home, you should consider other loaning companies, such as District Lending.
  • Home Safety: You must also ensure that the home you intend to purchase is safe and secure. This is why FHA recommends that you stay in the property for at least one year before applying for an FHA loan. You should also apply for the amount equivalent to your home’s price.
  • Employment History: An employment history of two years is also essential. There should be no gaps between the two years, but you can always provide explanations if there are any.
  • A credit score that is below 500, you might be required to begin with a closing cost of 10%.

FHA Loans Vs. Conventional Loans

Conventional loans are an alternative to FHA loans but are much stricter. You are required to pay private mortgage insurance (PMI) if you have a down payment of less than 20%, and you must also have a higher credit score to qualify for a conventional loan. These are some of the reasons why many home buyers go for FHA loans. Here is a better comparison between the two to help you understand their difference;

RequirementsFHA LoanConventional Loan
Down PaymentStarts from 3.5%Starts from 3%
Credit ScoreA credit score of 500 will require a down payment of 10%. And a score of 580 and above comes with a down payment of 3.5%.Must have a FICO score of 620
Loan TermsRanges from 15 to 30 years and may be fixed or adjustable termsRanges from 8 to 30 years and may be fixed or adjustable terms.
Mortgage InsuranceRequires you to pay a mortgage insurance premium upfront. You can also pay it monthly throughout the loan period. This is usually cheaper than PMI.Pay PMI if you start with a down payment of less than 20% or pay at least 20% and get your loan with no PMI.
Loan LimitsIt begins from $420,680 to $970,800, depending on where you live.The limit for most areas is $647,200 and can go up to $970,800 in high-cost areas for a single unit.
Interest RatesThis mostly depends on your qualification.It depends on your loan qualifications
Backed by;FHA loans are backed by the Federal Housing Administration (the government).Fannie Mae or Freddie Mac

Can I Qualify for a Higher FHA Loan?

FHA loan limits 2022 are $420,680 for low-cost areas and $970,800 for high-cost areas. While this can be a good amount for a first-time home buyer, others may require an FHA jumbo loan. So, is it possible to get it?

To get higher FHA mortgage limits, you must have a higher credit score and begin with a larger down payment. You will qualify for a high FHA Jumbo loan limit if you provide all the requirements your lender needs.

Here at District Lending, we can also help make the home-buying process effortless. Our company focuses on providing higher loan limits with low down payments. Once you apply for a loan in our company, we will connect you to a loan expert to ensure you successfully make your offers and move into your new home as soon as possible.


Should I choose an FHA loan?

If you’re looking for a fixed-rate loan that offers low costs and security features without requiring too much paperwork or high closing costs, then an FHA loan may be right for you. FHA loans are the best mortgage type for first-home buyers who do not want to strain to pay the loan.

Is getting an FHA Loan easy?

FHA loans are the easiest to qualify for, unlike many other types of loans available. You are good to go as long as you have a credit score of 580, employment history of 2 years, and a good income report. It does not matter whether you have been bankrupt or experienced a foreclosure before. The FHA lenders will still consider you for a loan.

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