FHA Lending Limit on Purchase and Refinance Transactions

This guide covers FHA lending limits on FHA loans on purchase and refinance transactions.  The FHA lending limits for 2025 are now capped at $524,225 on single-family homes unless the property is located in a high-cost area, which is $1,209,750. Both HUD and FHFA have increased loan limits for 2025. The increase of FHA lending limits by HUD and conforming loan limits by FHFA was due to rising home prices nationwide.

FHA Lending Limit Increases and What They Entail  

What are FHA Lending Limits:  

FHA lending limits are set by the U.S. Department of Housing and Urban Development (HUD) and revolve around particular area home prices. FHA loans allow borrowers to purchase homes using federally insured loans. Therefore, the HUD sets loan limits on FHA loans based on whether the location is low-cost or high-cost.  

When HUD Started Increasing Them

The U.S. Department of Housing and Urban Development (HUD) started increasing the limits around the late 2000s. Consequently, when home purchasing prices rose, HUD’s adjustments were aligned with them around 2008.  If HUD does not increase FHA lending limits, homebuyers will get priced out of buying a house. Home prices have been increasing significantly every year. 

Conforming Loan Limits and Their Increases  

What is Conforming Lending Limits

Conforming loan limits, also known as caps, are set by the Federal Housing Financing Agency (FHFA) on a defined loan type offered by Fannie Mae and Freddie Mac. These caps are reviewed annually and updated based on the lending opportunities present in the housing market.  

When They Started Increasing Them:  

The Federal Housing Finance Agency regulates cap increments, which commenced in the mid-2000s, around 2006. These changes follow the average national property purchasing price.  

Standard vs. High–Cost Areas (2023 Examples)  

Note: This example is taken from the latest data, so the figure is a one-unit property and must be adjusted accordingly. Actual limits differ yearly based on the Area where users check the data.

FHA Lending Limits

• Standard Cost Area: $524,225
• High Cost Area: $1,209,750  

Conforming Loan Limits:

• Standard Area: $806,500
• High-Cost Area: $1,209,750

Surrounded by context:  

For FHA loans, “standard” defaults in low-cost and high-cost counties, where HUD allows a higher ceiling. For more expensive local markets. The baseline limit is higher than the FHA’s standard limit for conforming loans in many areas. Still, it is capped at the same high-cost threshold. This design ensures that FHA and conforming programs adapt to the local market’s conditions while protecting lenders and borrowers from excessive loan sizes.  

HUD’s FHA Lending Limits:  

• Increased routinely (annually) around 2008.
• Economic boundaries for one-unit properties include roughly $524,225 as standard limits and a high cost of $1,209,750.  

FHFA’s Conforming Loan Limits:  

• Starting to increase in mid-2006.  
• Rounded figures should be used for baseline (standard) limits; the high-cost cap is approximately $806,500, and the other cap is $1,209,750.
• Remember to check updates directly from HUD and the FHFA for the most reliable and current figures since recalibrating annual thresholds is routine.
• FHFA first increased conforming loan limits to $453,100 in 2018.
• HUD, the parent of FHA, followed in increasing FHA Lending Limits on FHA Loans to $294,515 in 2018.
• FHA lending limits increased in all counties in the United States effective January 2018
• Unless the property is located in a high-cost area where, depending on the county, the FHA lending limit is now set at $294,515 effective January 2018
• Prior to increasing FHA lending limit, home buyers were limited on home purchases and the maximum loan amount capped at $275,665
• For example, last year, if a home buyer who was qualified to purchase a home for $300,000 could not have purchased it due to the $275,665 FHA Loan Limit cap
• Now with the higher FHA Lending Limits, they are able to purchase a home with a FHA lending limit of $524,225 in standard areas and $1,209,750 in high-cost areas.
• If the home buyer wants to purchase a higher-priced home, he or she can do so up to the maximum FHA lending limits

In this article, we will discuss and cover the FHA Lending Limits on FHA loans on purchase and refinance transactions.

Conventional Lending Limit

The conventional lending limit has been increased to $806,500.

• The conventional lending limit was increased by the Federal Housing Finance Agency (FHFA)
• Those homebuyers who want to purchase a higher-priced home and were seeking an FHA loan but are restricted to the new FHA lending limit of $524,225 will be forced to go through the conventional lending route
• However, conforming guidelines are much stricter than HUD guidelines
• For example, to qualify for an FHA home purchase loan with a 3.5% down payment, a home buyer only needs to have a 580 credit score
• For conventional loan programs, the minimum credit score required to qualify is 620.
• The waiting period for an FHA loan after Chapter 7 bankruptcy is two years
• Conventional loan programs require a minimum of a 4-year waiting period after a bankruptcy
• The minimum waiting period after foreclosure for an FHA loan is three years from the recorded date of a foreclosure
• For conventional loan programs, there is a mandatory 7 year waiting period after a foreclosure
• Maximum debt to income ratios to qualify for an FHA loan is 56.9% DTI
• For conventional loan programs, the maximum debt to income ratios is capped at 45%
• FHA allows for multiple non-occupant co-borrowers to be added to the borrower for income qualifications
• Conventional loan programs do not allow for non-occupant co-borrowers
• 100% gift funds are allowed for FHA loan programs
• Conventional loans only allow a portion of the down payment to be gifted

If a home buyer is restricted due to the above restrictions on conventional loan lending guidelines, then FHA loan programs may be the only route to go.

Waiting Period After Deed In Lieu Or Short Sale: Conventional Loan

• For those who have had a deed in lieu of foreclosure or short sale, they can qualify for a conventional loan if they have at least a 5% down payment on their home purchase after a four-year waiting period.
• This route may be a great alternative for homebuyers who had a deed in lieu of foreclosure or short sale and want to purchase a higher-priced home and need to get a loan that is higher than the FHA lending limit
• The biggest issue is that conventional loans have tougher lending requirements than FHA

Update On Conventional Loan After Deed-in-Lieu and Short Sale

The two-year waiting period after a deed in lieu of foreclosure and short sale for a conventional loan with a 20% down payment is no longer in effect. Fannie Mae has discontinued the two-year waiting period after a deed in lieu of foreclosure and short sale to qualify for a conventional loan with a 20% down payment in August 2014. New Fannie Mae mortgage lending guidelines to qualify for a conventional loan after a deed in lieu of foreclosure and a short sale is now four-year with 5% down payment and re-established credit

Home buyers who need to qualify for a mortgage with a direct lender with no mortgage overlays should contact us at GCA Forums Mortgage Group at 800-900-8569 or email us at gcho@gustancho.com. We have zero overlays on government and conventional loans. We are the nation’s largest mortgage broker and correspondent lender on non-QM loans and bank statement loans for self-employed borrowers.

Frequently Asked Questions on FHA Lending Limits

1. What Are the Limits on FHA Loans?

The limits on FHA loans, or FHA lending limits, are the amount loaned by the Federal Housing Administration (FHA) under its insurance policy. These limits are set flexibly, targeting markets in both expensive and inexpensive regions to make homeownership possible.

2. Why Are There FHA Lending Limits?

Limits are assigned based on the surrounding region’s median home values and other factors. HUD establishes these metrics and uses them to allocate the “standard” (or low-cost) limit and the higher limit for “high-cost” regions.

3. When Do These Limits Get Updated for FHA?

To ensure that the predetermined limits do not lapse or become outdated, HUD revises and modifies them yearly, keeping pace with changes in mid-market conditions and median home prices.

4. Explain Standard Areas and High-Cost Areas With Examples

• Standard Areas: These are the areas where the average house cost is below a predetermined value, which in turn means that the degree of housing loan availability is limited, too.
• High-Cost Areas: The FHA enables a larger maximum loan amount to be placed in regions with higher average home values, increasing living and building costs.

5. What is The Difference Between FHA Lending Limits and The Lending Limits for Conforming Loans?

As with FHA loans, their limits and conforming loans’ limits also change each year. However, unlike FHA loan limits, as determined by FHFA, conforming limits are generally higher in low-cost regions. Both the FHA and conforming limits can hit a certain maximum cap in high-cost regions.

6. What is The Significance of The FHA Lending Limits to Borrowers?

These limits significantly impact the amount of mortgage available under an FHA insurance scheme, affecting the amount one can borrow to purchase a house. They decide which property you can buy by financing an FHA loan.

7. Where Can I Find The Most Current FHA Lending Limits?

The last figures can be accessed from HUD’s website, where they are published. The documents are updated every financial year. It is advisable to check directly with HUD or with the lender for the most up-to-date information.

8. Do FHA Lending Limits Apply to All Types of Properties?

FHA limits mostly apply to one-unit properties, but the changes are different for various forms of multifamily properties with some special programs, so it is advisable to check the corresponding limit based on the specific property type you need.

This FAQ list is an overview of a more extensive article. Talking to a lender or checking resources will help with tailored recommendations or up-to-date statistics.