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FHA Loan Limits: Fact and Fiction

July 28, 2021

FHA Appraisal Refunds?

When it’s time to commit to buying a home, you’ll need to know what the conforming loan limit for the county where you want to buy the home is for the current year. FHA loan limits in 2021 are determined annually and occasionally there is an update posted during the year when circumstances warrant.

That’s one reason to investigate the loan limits early in the new year after they change–you don’t really know if they have changed or not until you check or are told by a lender or other authority what the going loan limits are.

Fact: FHA Loan Limits Vary Depending On The Market

Some counties are located in high-cost areas and have subsequently higher FHA loan limits than typical-cost or low-cost areas. Some housing markets have loan limits below the typical national average.

You will find higher FHA loan limits in places like Southern California, New York, Hawaii, and elsewhere.

FHA lenders will approve loans for borrowers who financially qualify for mortgages up to the maximum loan limit in that area. A buyer who wants to purchase a home with a higher price and higher loan amount than the area limit may need to apply for an FHA Jumbo Loan instead.

Ask your lender for home loan guidelines for Jumbo Mortgages to compare terms, costs, and other variables before you commit. You’ll be glad you did.

Fact: FHA Loan Limits May Vary Depending On Property Size

Some borrowers forget that a single-unit home has a lower loan limit than a two, three, or four unit property. You can buy a home with an FHA mortgage with as many as four living units, but you are required to be an owner-occupier.

How would a home with more living units and a higher loan limit affect your decision to buy or not buy? Sometimes the only way to find out is to take a look and see what the options are in that market.

Fact: FHA Loan Limits Are Reviewed Each Year But May Not Change In All Areas

The FHA does a loan limit review each year but that does not guarantee that all housing markets will get an adjustment in those limits.

Some housing markets may remain in a certain range (remember, FHA loan limits go higher for properties with more than one living unit) year to year depending on circumstances.

But FHA loan limits don’t rise and fall in the same way in all areas. Furthermore, when you are house hunting its smart to know your limits well in adavnce as the price you are given by the seller may or may not conform to FHA loan limits.

Fiction: FHA Loan Limits Can’t Be Appealed

The FHA reviews loan limits at the end of the current year but ahead of the new year–the decisions made don’t take effect until the first day of the new year. When the FHA finalizes the new loan limits you have a limited amount of time to appeal, but you CAN appeal the decisions by sending an emailed appeal with the phrase (enter the number of the New Year, i.e. 2021) Loan Limits to  Answers@HUD.gov. This email must be received before the first day of the new year.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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