Homebuyers

FHA Loan Limits Set to Increase in 2021

In late November, Fannie Mae and Freddie Mac announced that they are increasing their maximum conforming loan limits in 2021, but the GSE loan limits aren't the only ones going up.

The Federal Housing Administration announced that it is increasing the loan limits for FHA mortgages in 2021.

According to the FHA, loan limits for "most of the country" will rise in 2021 as a result of "robust home price appreciation."

For 2021, the base FHA loan limit will be $356,362, an increase of $24,602 over this year's loan limit of $331,760. That loan limit applies to much of the country.

But, in "high-cost areas" such as San Francisco and New York City, the FHA loan limit will be $822,375 in 2021, up from $765,600 this year. That will also be the FHA loan limit in some areas of Los Angeles and the San Jose-Santa Clara metro area.

There are, however, quite a few counties where the loan limits fall in between those two figures, referred to as the loan limit "floor" and "ceiling."

Here are a few examples from California. In part of the Modesto area, the loan limit will be $396,750. In the Riverside area, the loan limit will be $477,250. In part of the Sacramento area, the loan limit will be $598,000. In San Diego County, the loan limit will be $753,250.

And here are some examples from outside California.

In some of the Dallas-Fort Worth metro areas, the FHA loan limit will be $411,700 for next year. In parts of the Denver area, the loan limit will be $596,850, while in parts of the Nashville area, the loan limit will be $586,500. The loan limit for some parts of the Minneapolis-St. Paul area will be $402,500, while the loan limits in some parts of the Philadelphia area, the loan limits will be $431,250.

The FHA is required by federal law to establish its loan limits based on the GSEs' loan limits, which are dictated by the Federal Housing Finance Agency home price index.

The FHFA home price index showed that home prices rose by more than 7% in the last year, meaning that the GSE loan limits would increase by the same amount. As a result, the FHA loan limits are going up too.

According to the FHA, the loan limits are set to increase in 3,108 counties and remain the same in just 125 counties.