FHA Changes: Higher Loan Limits for 2017

On December 1, 2016, the Department of Housing and Urban Development (HUD) announced the revised FHA loan limits for 2017.

The maximum loan limits for purchase mortgages were increased in most counties across the U.S., and will remained unchanged in some counties. There were no counties with a decrease. Next year, FHA loan limits for a single-family home will range from $275,665 to $636,150. Those are the “floor” and “ceiling” amounts.

Visit FHAhandbook.com for a full list of FHA loan limits by county.

Fast Facts: 2017 FHA Loan Limit Changes

Here’s an overview of the recent changes to FHA loan limits, effective in 2017.

  • FHA loan limits vary by county, and they are partly based on the conforming caps established by the Federal Housing Finance Agency (FHFA). For instance, FHA’s minimum national loan limit “floor” for low-cost areas is typically set at 65% of the national conforming amount for the U.S.
  • For most counties across the country, the 2017 FHA loan limit for a single-family home mortgage will be $275,665. This is what HUD refers to as the “floor.”
  • In more expensive real estate markets (such as San Francisco, New York City, and the Washington, D.C. metro area), the single-family FHA loan limit can be as high as $636,150. This is the “ceiling.”
  • There is obviously a broad spectrum between the floor and ceiling figures mentioned above. For these “in-between” counties, FHA loan limits can vary widely as a result of variances in home prices. (You can use the FHAhandbook.com link provided above to find the caps for your county.)
  • Within each county, there are higher limits for multi-family properties, such as duplex and triplex units.
  • The FHA limit changes mentioned above will apply to mortgage loans with case numbers assigned on or after January 1, 2017. They will remain in effect until the end of that year. (They are reviewed and reconsidered every year.)
  • Though they are technically set at the county level, both conforming and FHA loan limits are generally the same across entire metropolitan areas. For instance, there is a single limit for the entire Seattle metro area, even though it encompasses three separate counties.

A Response to Rising Home Prices

These FHA changes are a direct result of rising home values across the U.S. As mentioned above, the Federal Housing Administration’s loan limits are based on the conforming caps set by the Federal Housing Finance Agency. The FHFA, in turn, bases its limits on median home prices.

So when home values rise significantly during the course of a year, we often see a corresponding change with both FHA and conforming loan limits.

This is exactly what occurred during 2016. According to the real estate information company Zillow, home prices across the U.S. rose by more than 6% from December 2015 to December 2016. During the same 12-month period, double-digit gains were reported in red-hot real estate markets like Dallas (19%), Portland (17%), and Seattle (14%).

In short, these 2017 FHA changes are a result of higher housing costs.

Helping Home Buyers Since the 1930s

The Federal Housing Administration’s loan program was established by the National Housing Act of 1934. It was part of President Franklin D. Roosevelt’s “New Deal” program, established during the Great Depression. The goal was to make housing and mortgage loans more affordable to Americans, particularly those of low to moderate incomes.

The FHA loan program is unique in that it provides federal insurance for home loans made within the private sector. Mortgage lenders who participate in the program receive insurance protection against borrower default, as long as they meet certain lending criteria.

As a result of this government backing, FHA lenders are often more lenient with their qualification criteria for borrowers (credit scores, debt ratios, etc.).

Aside from loan limits, HUD has not announced any other major changes to the FHA program for 2017. Nor do we expect any. The minimum down payment for an FHA-insured mortgage loan will likely remain at 3.5% through the end of 2017, where it has been for the last few years.