Homebuyers wanting to purchase a home with a lower down payment or credit score in 2021 can now finance a higher cost home. The Federal Housing Administration (FHA) has announced a 7.4% increase to the low-cost and high-cost area loan limits for FHA home loans financed in 2021 for 3,108 counties across the nation. In 125 counties, FHA’s loan limits will remain unchanged.
As of 1 January 2021, the FHA low-cost loan limit will increase to $356,362 for one-unit properties.
The 2021 FHA loan limit for one-unit properties in high-cost areas will be $822,375.
The FHA has adjusted loan limits for properties purchased in Alaska, Hawaii, Guam, and the U.S. Virgin Islands to account for higher construction costs, so properties in these areas have a ceiling of $1,233,550 for a one-unit property.
How is the FHA home loan limit determined?
FHA is required by the National Housing Act, as amended by the Housing and Economic Recovery Act of 2008 (HERA), to set Single Family forward loan limits at 115% of area median house prices. FHA calculates forward mortgage limits for a Metropolitan Statistical Area based on the county within the MSA having the highest median price.
The FHA sets its 2021 low-cost area mortgage limits at 65% of the national conforming loan limit of $548,250 for a one-unit property.
The FHA national high-cost area mortgage limits for 2021 are set at 150% of the national conforming limit of $548,250 for a one-unit property.