Researching FHA Loan Limits in Your Area

FHA loan limits place caps on the amount of funds you can secure through an FHA-insured loan in your particular geographic area. The Federal Housing Authority created this program to ensure confidence in FHA loans. If your bank or lender is FHA approved, then you can gain many advantages seeking an FHA back loan from them.

History of FHA Loan

During the depression, the real estate market was sorely hurt. The FHA was formed in 1934 to give confidence to home buyers who had lost faith in banks and bad loans. FHA guarantees also give confidence to banks that need protection from loan default. The scope of FHA has increased since the establishment of the Department of Housing and Urban Development.

How FHA Home Loans Work

Once your bank or lender makes a loan, that loan can be purchased by others. The FHA will only purchase loans meeting certain criteria from approved lenders. By purchasing the loan, FHA ensures that the loan will not be default on. Banks and lenders benefit from this practice because they have a guaranteed buyer for their loans. Borrowers win because they reap rewards like no prepayment penalties, fixed-rate interest rates and bad credit loans. FHA home loans are aimed at middle-to-lower-income families looking to buy their first home. To keep consistent with this policy, there are limits on the size of the loan.

Factors in FHA Home Limits

Median home price in your area - Depending on where you want to live, the limit will adjust. This was controversial when introduced. Many felt that this made it possible for people to buy homes in higher income areas. The purpose, though, is not to penalize low income families who live in expensive places like New York, San Francisco or Los Angeles.

Year you are looking - The limits will adjust each year. Make sure you are researching current limits when you are considering the size of loan you will be eligible for.

Type of home - The limits also will be different based on the type of home you are looking to acquire. If you are buying a single family home, your limits will be lower than those for a multifamily home. With multifamily residential homes, there will often be a per-unit maximum and a per-building maximum.

State and county programs - There may be a stimulus in place in your area to encourage borrowing. In this case, loan limits may increase as an incentive to buy.

How to Find the FHA Loan Limit in Your Area

Start with your bank or current mortgage lender. Ask if they have FHA loans, and then ask what the limits are in your area. If you want to do some independent research, the Internet is a great tool. Sites like Fannie Mae and Freddy Mac list national limits by county. Your state's department of housing and development will also likely list the limits. As previously mentioned, these limits depend on the exact independent variables you enter. If you leave out details such as your specific zip code of interest, you may find the limits are not the same.