FHA is required by a federal law known as the National Housing Act (NHA) (and its’ amendments found in the 2008 Housing and Economic Recovery Act) to establish FHA home loan limits.
These limits are announced close to the end of the previous year in anticipation of the new year.
Those limits are set at 115 percent of area median house prices, with a low-end limit (the “floor”) and an upper limit (the “ceiling”) for FHA loan limits. There’s an annual review of these limits to see if they should be adjusted due to economic factors or other variables.
In the first week of December 2021, the Federal Housing Administration announced higher FHA loan limits for the year 2022, and those higher limits are effective for both forward mortgages/purchase loans as well as for FHA Home Equity Conversion Mortgages (HECMs).
But why the increase? This is the third year in a row that FHA loan limits have gone up. According to the FHA, limits increased this time due to more expensive housing markets.
“The increase in loan limits, commensurate with the increase in home prices, will allow qualified individuals and families to continue to access FHA-insured mortgages to achieve affordable home financing,” according to Principal Deputy Assistant Secretary for Housing and FHA Lopa Kolluri, who is quoted in the FHA/HUD press release.
If you noticed the FHA loan limits increasing in your housing market, it’s likely due to “robust house price appreciation” according to an FHA press release, “which is factored into the statutorily mandated calculations FHA uses as part of its methodology for determining the limits each year.”
Many are now aware the loan limits are going up–but how widespread is the increase? According to the Department of Housing and Urban Development official site, maximum FHA loans are increasing in more than 3100 counties in the United States, with 45 counties seeing no change in the limits at all.
And what about FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages? The FHA HECM “maximum claim amount” increases to $970,800 from $822,375.
HUD notes that FHA HECM regulations “do not allow the HECM limit to vary by MSA or county; instead, the single HECM limit applies to all HECMs regardless of where the property is located.”
FHA loan limit increases do not take effect immediately. The new, higher FHA loan limits for 2022 are only offered for loans with FHA case numbers on or after 1 January 2022.
If you aren’t sure how the new FHA loan limits may affect your transaction, have a conversation with a participating FHA loan officer who can help you better understand your options going forward.
FHA loans can and sometimes do exceed these loan guaranty limits.
If you need information on an FHA Jumbo mortgage, contact a participating lender and ask about what it takes to be qualified for a loan amount above and beyond the FHA limit.
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