Federal Housing Association Announces New Loan Limits for 2023- Mortgage Monday

Federal Housing Association Announces New Loan Limits for 2023

The Federal Housing Administration (FHA) has announced higher loan limits for 2023.  These new limits will apply to both Single Family Title II and Home Equity Conversion Mortgages (HECM).  

Loan limits will increase for most regions due to increases in house prices across the country in the first half of 2022.  The median house price per region is a key factor in how the FHA determines its limits each year.  The new rates will reflect these price increases and therefore ensure ongoing access to FHA insured mortgage financing for homebuyers.

What are the new FHA forward mortgage loan limits for 2023?

The new loan limits become effective on January 1st, 2023.  FHA case numbers that were assigned on or after this date will be eligible for the new limits.  Please see the table below for details of the new amounts.

*Mortgage limits for the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands are adjusted by FHA to account for higher costs of construction.

What are the new HECM (Reverse Mortgage) loan limits?

The maximum claim amount for a Home Equity Conversion Mortgage (HCEM) will increase from $970,800 to $1,089,300.  These changes apply to FHA case numbers assigned on or after January 1st, 2023.  This revised amount is applicable to all areas including those in the special exception areas noted in the table above.

How does the FHA calculate the rates?

The FHA is governed by the National Housing Act.  This states that the Single Family forward mortgage loan limits are set at 115% of the median house price for a specific region.  These regions are either counties or Metropolitan Statistical Areas (MSAs).  All regions are subject to a loan floor and ceiling level.

These floor and ceiling limits are based on the national conforming loan limit set by the Federal Housing Finance Agency (FHFA) for conventional mortgages owned or guaranteed by Fannie Mae and Freddie Mac (see our previous blog post here for more details on how these limits have changed for 2023).

What are the floor and ceiling limits?

The FHA’s new minimum national loan limit floor is set to 65% of the latest national conforming loan limit of $726,200.  It therefore now stands at $472,030 for a one unit property.  This floor comes into effect where 115% of the median house price is lower than the new floor limit of $472,030.

The FHA is required to set its maximum loan limit ceiling for high cost areas at $1,089,300.  This represents 150% of the national conforming loan limit as mentioned in our previous post.

In addition, the HECM maximum claim amount is set to 150% of the Freddie Mac national conforming limit of $726,200.  The FHA is not currently allowed to vary this limit by region.

Where can I find more details on the FHA loan limits, floor and ceiling ranges by area?

A complete list of the FHA loan limits as well as details of areas that sit at either the ceiling or between the floor and the ceiling, can be found here.