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How to Determine Your Qualified FHA Loan Amount


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TERMINOLOGY

An FHA loan amount is the amount of money you can borrow when you take out a Federal Housing Authority mortgage loan. FHA mortgage loans are issued by private lenders and insured by the FHA. The FHA's insurance protects lenders from financial loss in case you default. Because of this, lenders can afford to give you more generous terms, allowing you to borrow far more than what you would be able to borrow with one of their private loans. However, you still have to face limits on how much you can borrow. These limits depend on a number of factors that must all be taken into account when you try to figure out what kind of mortgage you can actually qualify for.

Understanding FHA Mortgage Limits

The current law states that you can borrow as much as 97 percent of the home's value. However, this is true only if that number doesn't exceed the FHA mortgage limits.

The mortgage limits exist on two levels--national and local. The FHA sets the averages on the national level. The limits are divided into three categories: standard mortgage limits, high cost mortgage limits and mortgage limits outside the contiguous United States. These limits are fine-tuned on county levels to account for population density and local real estate market conditions. The limits are further broken down on both national and county levels based on how many families the house is for. The more family units in a house, the larger the limits.

Since economic and population factors change over time, all FHA mortgage limits are adjusted every year. Therefore, the numbers sited here are good only until the end of 2010.

Standard FHA Mortgage Limits

The standard limits are the average limits that apply to most of the contiguous United States. If you live outside a major city and its surrounding suburbs, odds are pretty good that these limits apply to you. As of 2010, they are as follows:

  • Single-family homes' limit--$271,050.
  • Two-family homes' limit--$347,000
  • Three-family homes' limit--$419,425
  • Four-family homes' limit--$521,250

High-Cost Area FHA Mortgage Limits

These limits are designed to be more in line with housing prices in Metropolitan Statistical Areas--census-designated densely populated areas that include cities and the surrounding suburbs. It should be noted that Metropolitan Statistical Areas don't always correspond to popular perceptions. For example, the Chicago MSA is larger than what most people of Illinois would consider suburban Chicagoland. As of 2010, these limits are as follows:

  • Single-family homes' limit--$625,500
  • Two-family homes' limit--$800,775
  • Three-family homes' limit--$967,950
  • Four-family homes' limit--$1,202,925

FHA Mortgage Limits outside the Contiguous United States

Alaska, Hawaii, Guam, the Virgin Islands and other US territories outside the contiguous United States are subject to higher mortgage limits than the rest of the country. As of 2010, those limits are as follows:

  • Single-family homes' limit-- $938,250
  • Two-family homes' limit--$1,201,150
  • Three-family homes' limit--$1,451,925
  • Four-family homes' limit--$1,804,375

How To Determine Your FHA Mortgage Limit

The first thing you should do is calculate what 97 percent of your home's value equals. Once you have that written down, you should figure out if that number exceeds your local limits. While the figures discussed in the preceding paragraphs are good for determining averages, keep in mind that your limits may be higher or lower because of county-level adjustments. This is especially true if your home is in a suburban area or medium-sized town. Your best bet is to visit the FHA's official website. There, you can either look up your county's limits by going through the tables uploaded on the site or using the site's mortgage limit calculator. You can access both options by clicking on the "Resources" tab under the site banner.