FHA Loan Limits For 2020
The Federal Housing Administration (FHA) announced for 2020 their new schedule of loan limits for the upcoming year (Source). Due to a steady increase in housing prices, most areas in the country will see a slight increase in loan limits in 2020. These loan limits are effective for case numbers assigned on or after January 1, 2020, and will remain in effect through the end of the year.
FHA will increase its maximum loan amount, or “floor,” to $331,760, which is up from $314,827 for 2019. This new higher loan limit will affect a large portion of the country.
In addition to housing market limits, FHA loan limits are also affected by the loan-to-value (LTV) ratio which may vary in each transaction. The LTV is a calculation of the percentage of the loan satisfied by the down payment. Typical FHA single-family forward mortgages include an LTV of 96.5% based on a minimum down payment of 3.5%. (In some cases, a higher down payment may be required based on a borrower’s financial qualifications).
This calculation would effectively allow an eligible homebuyer to purchase a home with a sales price of up to $343,792. With the required 3.5% down payment, that would put them at the new maximum loan limit of $331,760.
If you’re interested in applying for an FHA Loan, you can start here.
Not only did the “floor” increase, but in high-cost areas, the FHA national loan limit “ceiling” will also increase to $765,600 from $726,525. Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $765,600. This amount is 150 percent of the new 2020 national conforming limit of $510,400.
Due to changes in housing prices and the resulting change to FHA’s “floor” and “ceiling” limits, the maximum loan limits for forward mortgages increased in 2,948 counties. There were no areas with a decrease in the maximum loan limits for forward mortgages though they remain unchanged in 286 counties.
FHA calculates forward mortgage limits based on median house prices in accordance with the National Housing Act. FHA’s Single Family forward mortgage limits are set by Metropolitan Statistical Area and county. Loan limits for reverse mortgages are also calculated but these do not vary by MSA or county; instead, a single limit applies to all mortgages, regardless of where they are originated.