FHA home loan limits will tell you what the maximum loan amount would be depending on where you live. Some of the calculations are based on average property values for the area, the type of property you are purchasing, and average income levels for that area. Each of these charts show the current loan limits for each county whether you are buying a single family home, a duplex, triplex, or fourplex.
Why are there FHA home loan limits?
Okay, if we are going to discuss what FHA loan limits are; we first need to know what the FHA is. The letters stand for the Federal Housing Administration, and it is a government program aimed at helping people get into a home of their own.
Nowadays, it is known as the Department of Housing and Urban Development (HUD), but it was founded back in 1934. It had two objectives back then: help people buy a home with a minimal down payment, and at the same time protect the lender’s investment.
After all, people who cannot get a loan from a regular bank are generally those who are at a high risk of defaulting. Over the years, the administration has helped a great many low-income families get the homes they have always wanted. It is said that getting a person into a home goes a long way toward making them feel a part of their community.
However, the one problem with the administration has been that the FHA loan limits tend to lag behind the current home prices. Whereas firms like Fannie Mae and Freddie Mac, being in the private sector, tend to keep pace with the market.
What is the Current FHA Limit in my County?
Keep in mind that one of the advantages of the FHA loan is that there is a lower down payment requirement. As a result, this type of home loan is more geared towards people that are buying their first home, or people that have very little money to use for a down payment.
Since this type of loan is geared towards those types of borrowers, this loan program has a maximum loan limit to prevent people from buying an expensive property and only putting a few thousand dollars as a down payment. That would be a risky loan to give and so the lenders protect themselves by putting a cap on the loan limit.
Home loans are all about evaluating the risk and providing a lending solution to the borrower without putting the lender in a position where the loan would not be repaid. As a general rule of thumb, the more risky the loan would be, the more expensive the loan will be to obtain so that the risk is offset.
So, with housing as the FHA’s goal, it had to set some limits as to what size loans it would allow. Basically, the FHA loan limits are set up on a regional basis, and they define how large of a mortgage the administration will underwrite.
If you feel your income is not high enough for a regular mortgage, you can try for one from the FHA. Even if the FHA loan limits are not raised, you still have a very good chance of getting a fine home.