The floor for the FHA 2022 loan limits is $420,680, while the ceiling is $970,800 for single-family homes.
Homeowners planning to use an FHA loan can expand their price range by more than $60,000 next year thanks to substantial increase in loan limits.
On December 1, the Federal Housing Administration (FHA) announced new loan limits for 2022 that are substantially higher than 2021’s. Beginning January 1, the loan limit floor is set at $420,680 for single-family homes -- up from $356,362 -- for areas where 115% of the median home price is less than this limit.
The 2022 maximum, known as the “ceiling”, is set at $970,800 for single-family homes or 150% of the national conforming loan limit. This ceiling is the maximum amount a homebuyer can borrow from the FHA for a single-family home, and is reserved for certain high-cost areas in California, Colorado, New Jersey, New York, Washington D.C., and isolated counties in the Mountain West.
Updating loan limits gives homebuyers with FHA loans more housing options after a year of record price growth.
“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,” Principal Deputy Assistant Secretary for Housing and FHA Lopa Kolluri said in a press release.
The FHA announcement comes shortly after the Federal Housing Finance Administration (FHFA) raised the 2022 conforming loan limits by a record 18.05% to match the robust home price growth in 2021.
The FHA sets its loan limits based on the FHFA’s, as required by the National Housing Act. The $420,680 FHA floor is 65% of the FHFA’s baseline limit of $647,200 set for loans backed by Freddie Mac and Fannie Mae. This limit applies to most homes in the U.S. in more than 3,000 counties.
Based on area median home prices, some counties have unique loan limits between the floor and ceiling.
For example, a home in Phoenix can be financed up to $441,600 with an FHA loan.
Multi-unit homes and special exception areas
The FHA also set new limits for multi-family properties and “special exception” areas with higher costs of construction. These include Alaska, Hawaii, Guam, and the Virgin Islands.
In certain cases, homebuyers will be eligible to borrow more than $2.8 million to buy a four-unit home in a special exception area like Alaska or Hawaii.
Property Type Floor Ceiling AK/HI Single-unit$420,680$970,800$1,456,200Two-unit$538,650$1,243,050$1,864,575Three-unit$651,050$1,502,475$2,253,700Four-unit$809,150$1,867,275$2,800,900Data from FHA.
The FHA also used the single-unit ceiling ($970,800) as the maximum amount for Home Equity Conversion Mortgage (HECM), better known as reverse mortgages. This limit does not vary by location, but remains the same in all U.S. counties.
2022 limits increase FHA buying power
Home prices soared in 2021, up more than 18% compared to 2020. If not for increased limits, some buyers may have been locked out of using FHA in 2022.
The 2021 maximum FHA loan amount in much of the country was just above $350,000. This dollar amount does not go as far as it used to. In locations like Phoenix, Miami, and Tampa, Fla., home prices climbed near 30% in 2021.
Competition is fierce, especially for more affordable home price ranges. The new loan limit of $420,680 should give FHA buyers more power when bidding for homes.
Overall, FHA’s announcement should be welcome news for buyers in the new year.
Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.