Similar to the FHFA, the U.S. Department of Housing and Urban Development (HUD) announces maximum loan limits each year for FHA loans.
This is thanks to continued home price appreciation, and the fact that the calculation of the FHA loan limits is driven by the conforming loan limit itself.
To come up with the FHA loan limits, HUD uses a percentage of the national conforming limit to set both a floor and a ceiling.
In cities like Los Angeles, home buyers can enjoy the higher ceiling loan limit, while many less expensive cities nationwide are set at the floor. There are also limits in between these two thresholds.
FHA Low-Cost Area Loan Limits (The Floor)
One-unit property: $420,680
Two-unit property: $538,650
Three-unit property: $651,050
Four-unit property: $809,150
To calculate the FHA loan limit floor, HUD uses 65 percent of the national conforming limit, which will be $647,200 for a one-unit property in 2022.
That puts it at $420,680, up from $356,362 in 2021. That’s a big 18% increase, and enough to make many more home buyers eligible for FHA financing nationwide.
It’ll be even higher for multi-unit properties, such as duplex or triplex.
If you put down the minimum 3.5% on a home purchase, you’ll now be able to purchase a property for as much as $435,000.
FHA High-Cost Area Loan Limits (The Ceiling)
One-unit property: $970,800
Two-unit property: $1,243,050
Three-unit property: $1,502,475
Four-unit property: $1,867,275
In more expensive metros nationwide, HUD allows for even higher loan limits, known as high-cost area mortgage limits.
These are set at 150 percent of the conforming limit, which matches them up with the high cost loan limits for mortgages backed by Fannie Mae and Freddie Mac.
As you can see, a four-unit property permits a near-$2 million loan limit, which tells you just how high home prices have risen.
This means a home buyer in Los Angeles could purchase a $1.5-million-dollar triplex with just $52,500 down. That’s pretty amazing.
Aside from the floor and ceiling, there are many metros that fall between these two limits throughout the country.
For example, the maximum loan limit for an FHA loan on a one-unit property in Denver, Colorado will be $684,250 in 2022.
Similarly, home buyers in the Miami-Ft. Lauderdale area will enjoy higher loan limits of $460,000 next year.
And in Phoenix, Arizona it will be $441,600, up from $368,000 in 2021. The same goes for Atlanta, where the 2022 FHA loan limit will be $471,500.
2022 FHA Loan Limits for Special Exception Areas
One-unit property: $1,456,200
Two-unit property: $1,864,575
Three-unit property: $2,253,700
Four-unit property: $2,800,900
Lastly, there are even higher loan limits for so-called special exception areas, which include Alaska, Guam, Hawaii, and the Virgin Islands.
They are adjusted higher to account for more expensive construction costs in these states and territories.
For a four-unit property, this loan limit is nearing a staggering $3 million, which tells you the dollar just ain’t worth what it used to be.
Regardless, this means a lot more home buyers will be able to take advantage of an FHA loan vs. a conventional loan.
Note that these are all forward mortgage limits for calendar year 2022, which are effective for case numbers assigned on or after January 1st, 2022.
For reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs), the maximum nationwide claim amount will rise to nearly $1 million dollars ($970,800) for all cities.
If you were on the cusp of FHA loan eligibility because of a loan limit issue, you may want to take a second look at your loan scenario.