California residents with lower credit scores or limited down payment savings can still purchase property with the help of an FHA loan. These mortgages, backed by the Federal Housing Administration, limit how much you can borrow depending on where you live. For many single-family homebuyers in California, the FHA loan limit is $498,257, but in more expensive areas like Los Angeles, Orange, Santa Cruz and San Francisco counties, you could borrow as much as $1,149,825.
The Federal Housing Administration (FHA) sets limits on the maximum loan amount that can be insured for FHA loans each year These loan limits vary by county and determine the maximum FHA loan amount available in each area. As a high-cost state, California FHA loan limits are among the highest in the nation
Understanding the FHA loan limits for your county in California is important to determine if you qualify for FHA financing and the maximum FHA mortgage amount you can borrow Here’s a detailed overview of the 2023 FHA loan limits in California and what they mean for homebuyers,
FHA Loan Limits Basics
The Department of Housing and Urban Development (HUD) sets FHA loan limits each year based on home prices and median incomes across the country. There are two key loan limits:
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FHA Floor – This is the minimum FHA loan limit for all low-cost counties across the U.S. In 2023, the floor is $472,030.
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FHA Ceiling – This is the maximum FHA loan limit for high-cost counties. The 2023 FHA ceiling is $1,089,300.
In addition, some high-cost counties have even higher limits called FHA county limits. FHA loan limits range from the floor to the ceiling or county limit based on an area’s home values.
2023 California FHA Loan Limits
In 2023, FHA loan limits in California range from $472,030 to $1,089,300 depending on the county. There are several high-cost counties with FHA limits above the ceiling up to $1,475,000.
Here are the key details on 2023 FHA loan limits for California:
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State Floor – $472,030. This is the minimum FHA loan limit for low-cost counties in CA.
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State Ceiling – $1,089,300. This is the maximum FHA limit for high-cost counties without special county limits.
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High Balance Limit – $1,089,300 to $1,475,000. In high-cost counties, FHA loans above the ceiling and up to the county limit are called high balance FHA loans.
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# of Counties at Ceiling – 28 counties have max limits at the FHA ceiling of $1,089,300.
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# of Counties Above Ceiling – 19 counties have higher limits from $1,089,300 to $1,475,000. These counties include Alameda, Contra Costa, Los Angeles, Marin, Napa, Orange, San Diego, San Francisco, San Mateo, Santa Clara, Santa Cruz, and Ventura among others.
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Highest Limit – San Francisco county has the max FHA loan limit at $1,475,000.
In total, 11 counties have limits at the floor while 47 counties are at the ceiling or above. Use the FHA loan limit lookup tool to check limits in your California county.
FHA High Balance Loans in California
FHA mortgage amounts between $1,089,300 and $1,475,000 are called FHA high balance loans. They are available in high-cost counties where the FHA county limit exceeds the ceiling.
High balance FHA loans have slightly higher mortgage insurance and upfront MIP costs but otherwise the same requirements as standard FHA loans. Down payments are still just 3.5% of the purchase price.
High balance FHA loans expand buying power and provide an affordable low down payment option for expensive metro areas like Los Angeles, San Francisco, San Diego and others.
How FHA Loan Limits Work
FHA loan limits determine the maximum FHA loan amount you can qualify for. However, the home purchase price and your income ultimately decide how much home you can afford.
Here are a few key points on how FHA loan limits affect eligibility and loan sizing:
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You can qualify for any FHA loan up to your county limit. For example, if your county limit is $650,000, your FHA loan can be anywhere from $100,000 to $650,000.
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Your DTI and income determine the actual FHA loan amount. FHA loans require a 31%/43% DTI. Even if your limit is $650k, your budget may only support a $400k FHA mortgage.
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You can buy a more expensive home by putting down a larger down payment. FHA loans require just 3.5% down. If you put 10% down on a $900k home in a county with a $650k limit, this is allowed.
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FHA limits apply to the base loan amount, not the sales price or appraised value. You can buy a $900k home with 10% down as long as the loan amount stays under the county limit.
The takeaway is FHA limits represent the maximum base FHA loan amount, not the home purchase price or appraisal amount.
Checking FHA Loan Limits for Your Area
You can check FHA loan limits by county using HUD’s loan limit lookup tool. Just search your state and county to see the base limit along with limits for number of units.
Limits vary depending on unit count. For example, a 2-unit home has a higher base limit than a single-family home.
Realtors, lenders and other home professionals can also help check your county’s current FHA limit when getting pre-approved.
Comparing your budget, the home price and your county’s FHA limit will give you a better idea of the mortgage amount and down payment needed for FHA financing.
The Benefits of FHA Loans in California
FHA loans are a popular financing option in California because they offer low down payments, flexible credit, and affordable rates. Top benefits include:
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Low Down Payments – FHA allows down payments as low as 3.5% of the purchase price. This helps first-time buyers get into a home more easily.
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Lower Credit Requirements – FHA has flexible credit standards with minimum 580 FICO scores. This helps more buyers with fair/poor credit qualify.
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Low Mortgage Insurance – FHA loans require mortgage insurance (MIP) but rates are competitive at just 0.85% of the loan amount per year.
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Simple Qualifying – FHA uses common sense underwriting looking at your full financial picture. This helps self-employed buyers or those with unique income situations qualify.
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No Income Limits – FHA does not have income limits like conventional loans. Your income just needs to be enough to support the mortgage payment.
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Lower Cash Needed – In addition to low down payments, FHA limits upfront costs to 3.5% of the purchase price. This reduces the cash needed at closing.
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Fixed Rates – FHA offers long-term fixed rates that protect against rising interest rates.
FHA loans balance flexibility, affordability and sensible underwriting to help more California homebuyers. They are a smart financing choice especially for first-time buyers or anyone needing a low down payment option.
Next Steps – Applying for an FHA Loan
Once you have an idea of the FHA loan limits in your area, you can start the mortgage process. Key steps include:
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Get pre-approved – Work with a lender to get pre-approved for a max FHA loan amount based on your income, debts, and credit score.
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Shop for homes – Once pre-approved, you can start searching for homes priced under your county’s FHA limit and within your budget.
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Make an offer – Work with a real estate agent to submit an offer with your pre-approval letter attached.
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Final loan approval – After an accepted offer, your lender will verify your details and issue final loan approval.
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Close on time – Finally, work quickly to gather requirements your lender needs and close on time.
FHA pre-approval takes just minutes but shows sellers you are a qualified buyer. Rates and limits change annually so shop lenders and check your FHA loan eligibility early. With low down payments from just 3.5%, FHA loans can help more California families buy their dream home in 2023!
How are FHA loan limits determined?
The amount you can borrow using an FHA loan changes each year to reflect shifts in home prices across the country. The FHA sets its financing cap as a percentage of the national conforming loan limit established by the Federal Housing Finance Agency for conventional loans or mortgages that follow a list of rules created by Fannie Mae and Freddie Mac.
In 2024, the largest FHA loan someone can get for a single-family home in most parts of the country is $498,257, or 65% of the national conforming loan limit of $766,550. This amount is known as the loan limit “floor.” However, those living in more expensive areas can finance even more, potentially borrowing up to the loan limit “ceiling” amount of $1,149,825, or 150% of the national conforming loan limit.
Only buyers in Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Clara and Santa Cruz counties can access that top loan amount in California though. Residents living in 27 other counties across the state, including Butte, Fresno and Yuba, can borrow only up to $498,257, while the remaining 21 counties have a limit that falls somewhere between that loan limit floor and ceiling.
How to qualify for an FHA loan in California
Since FHA loans are backed by the government, meaning a lender will be reimbursed if you default on your payments, they have certain qualification requirements that need to be met in order to qualify:
→ Credit score of at least 500. If your credit score is this low, you must put down 10% or more when buying the home. Those with scores of 580 or higher only need a 3.5% down payment.
→ 3.5% down payment. You can finance all but 3.5% of the home’s purchase with an FHA loan provided your credit score tops 580. Buyers with lower scores have to make at least a 10% down payment.
→ Debt-to-income ratio of 43% or less. Before approving you for a new loan, lenders calculate how much of your income goes toward debt repayment by dividing your total debt by your earnings. The higher your DTI ratio, the more lenders fear you’ll be unable to handle your repayment obligations and could default. So, the FHA prefers borrowers with a ratio of 43% of less. You may still qualify with a larger debt-to-income ratio if you have a strong credit score or large cash reserves.
→ FHA mortgage insurance coverage. You must purchase two kinds of mortgage insurance to get an FHA loan. The upfront mortgage insurance premium costs 1.75% of the total loan amount and is usually added on to your outstanding mortgage balance. The annual mortgage insurance premium runs between 0.15% and 0.75% of the total loan amount and is commonly factored into your monthly mortgage payment.
→ Get an FHA appraisal. The FHA requires that any home purchased with one of its loans pass a $400-$700 FHA appraisal to confirm the value, condition and safety of the property.
→ Used for primary home purchase. FHA loans cannot be used to buy vacation homes or rental properties, only primary residences. You must also live in the home you purchase for at least one year.
→ Solid job history. There are no income limits or requirements with FHA loans, but lenders will want to see a steady employment history so expect to provide two years’ worth of pay stubs and W-2s, as well as employer contact information. Be prepared to explain any resume gaps as well.
Los Angeles County FHA loan limit 2023
FAQ
Will FHA limits go up in 2024?
What is the maximum you can borrow on an FHA loan?
What is the loan limit for 2024 in California?
What is the FHA mortgage rate for 2023?
What is the largest FHA loan you can get in 2024?
In 2024, the largest FHA loan someone can get for a single-family home in most parts of the country is $498,257, or 65% of the national conforming loan limit of $766,550. This amount is known as the loan limit “floor.”
What is the FHA loan limit in California?
To qualify for an FHA loan in California, your home loan must be below the local FHA loan limits in your area. For 2024, the maximum loan limit in California is $498,257 for a single-family home and $2,211,600 for a four-plex. Limits varies by county. The minimum loan limit is $5,000. Loan limits vary by county and home size.
How much is a conforming loan in California 2023?
2023 conforming loan limits for California is $726,200 and goes up to $1,089,200 for high-cost counties (aka. high balance mortgage loans) for one-unit properties. Every year Fannie Mae & Freddie Mac, FHA, and the VA revise their California county maximum mortgage limits.
When did FHA release a Mortgagee Letter 2023-21 & 2024 HECM limit?
On November 28, 2023, FHA published Mortgagee Letter 2023-21, 2024 Nationwide Forward Mortgage Limits, and Mortgagee Letter 2023-22, 2024 Nationwide Home Equity Conversion Mortgage (HECM) Limits for case numbers assigned on or after January 1, 2024.
How much can you borrow on an FHA loan in California?
These mortgages, backed by the Federal Housing Administration, limit how much you can borrow depending on where you live. For many single-family homebuyers in California, the FHA loan limit is $498,257, but in more expensive areas like Los Angeles, Orange, Santa Cruz and San Francisco counties, you could borrow as much as $1,149,825.
What is the FHA Forward mortgage limit in Cy 2024?
FHA’s nationwide forward mortgage limit “floor” and “ceiling” for a one-unit property in CY 2024 are $498,257 and $1,149,825, respectively. Select the links below for additional mortgage limits guidance for forward mortgages: Refer to Mortgagee Letter 2022-21 for more details.