2023 will be off to a great start for homebuyers with the news that the Federal Housing Association (FHA) is increasing the loan limit for certain mortgage loans.
That means more buying power for you, and a better chance at being able to buy your dream home in the new year. But what exactly does that look like?
What Loans Are Covered
The two loans getting increases are the Single Family Title II forward mortgage and the Home Equity Conversion Mortgage (HECM) programs. With both of these, the increases come from the steep increase in home prices throughout the country through early 2022.
What Are The Increases?
The graph below shows what the new limits are for both Single Family and HECM loans, effective for any case numbers assigned on or after January 1, 2023:
| Property Size | Low-Cost Area “Floor” | High-Cost Area “Ceiling” |
| One-Unit | $472,030 | $1,089,300 |
| Two-Units | $604,400 | $1,394,775 |
| Three-Units | $730,525 | $1,685,850 |
| Four-Units | $907,900 | $2,095,200 |
Both of these are conforming loans, meaning that they conform to the standards of the Federal Housing Finance Agency (FHFA). Usually, these result in lower interest rates than non-conforming loans.
How Loan Limits Are Decided
The main things that determine the loan limits are housing prices in a particular area, as well as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), two areas of the government that are dedicated to regulating home mortgages.
With home prices, there are areas that are labeled “high cost,” like Manhattan or San Francisco, where the median home price is much higher than it is in other areas of the country.
There are also “low cost” areas, where home prices are much lower. These two points create a “floor” and “ceiling” for loan amounts–the highest and lowest amounts the loan provider will be able to give.
So, for a standard one-unit home, the “floor”–the smallest amount of a loan they can provide–is now $472,030 in 2023, and the “ceiling” is $1,089,300.
Fannie Mae and Freddie Mac, meanwhile, take care of the security portion of a mortgage. Criteria like credit scores, down payments, and debt-to-income ratios are things they’ll look at while determining the loan amount that a homebuyer is eligible for. For now, that remains the same as it did in 2022.
What This Means For Homebuyers
Ultimately, what this boils down to is that potential homebuyers are able to pull out a bigger loan in order to buy a home, even in the face of inflation. As for the differences between the floor and ceiling, that’s dependent on where it is you want to move. Keep in mind that in some locations, even if they’re regarded as a “low-cost” area, the low-cost loan amount might not be enough.
If you’re unsure about whether taking the plunge into being a homeowner is the right step, American Mortgage Resources is here to help. Contact us today, and let’s figure out the next step for getting you the home of your dreams.