Higher FHA home loan limits are coming

Rising house prices and higher interest rates have made it more challenging than ever for first-time home buyers to break into the housing market. With these challenges in mind, many first-time buyers have decided to use Federal Housing Administration (FHA) home loans to afford their first homes. These loans are federally insured, which means that they are guaranteed by the government in case the borrower defaults on payments. This insurance allows people to borrow the money they need to purchase a home with less stringent requirements than a traditional mortgage.

Some of these requirements include:

• A minimum credit score of 500 and a two-year history of working to rebuild your credit or a better credit history than in the past.
• A lower down payment requirement that is dependent on your credit score. For example, according to NerdWallet, with a score of 580 or more, you may qualify for a 3.5% downpayment, while a lower credit score may require 10% of the loan value for a downpayment. The requirements depend on your financial situation, the value of your loan, and the lender you are using.
• A debt-to-income ratio below 50%, including child support payments, student loans, liens, court judgments, or federal debt.

If you meet these requirements, as well as being able to demonstrate two years of steady employment, you may qualify for an FHA home loan, which can make it easier to buy your first home.

FHA home loans are an excellent tool for first-time home buyers. One of the things that is so useful about FHA home loans is that the baseline loan limits are required by law to meet current housing prices. Each year, the Federal Housing Administration has to consider the current housing market and adjust limits as needed. With the average house price in the nation rising to $412 000 in September, it was recently announced that the new conforming loan limit in 2024 is $498,257, a $60,000 increase from last year. In states where housing is particularly expensive, the loan limits are now as high as $1,149,825 to match the market.

This higher limit is great for potential first-time homebuyers. Not only does it allow them to borrow more with less upfront commitment, but the higher loan amount also allows them to compete in markets where the average home price is even higher than the national average. For example, some states have higher median prices than the national average, including:

• Arizona: $435, 000
• California: $785,000
• Colorado: $612, 000
• Hawaii: $750,000
• Idaho: $470,000
• Massachusetts: $610,000
• Montana: $530,000
• Nevada: $437,000
• New Hampshire: $470,000
• New Jersey: $494,000
• New York: $490,000
• Oregon: $502,000
• Rhode Island: $467,000
• Utah: $560,000
• Washington: $602,000

As you can see, that’s a significant number of states with housing prices above the FHA loan limit. The new higher loan limit will allow buyers in these states and others to access the financing they need to purchase their first homes. If you think you qualify for an FHA home loan, we can help you get one. We have a network of agents nationwide who are ready to help you get the financing you need to become a homeowner today. So visit your local PRMI advisor today to get started.