FHA Loan Limits for 2020: What You Need To Know

The FHA loan limit determines the maximum amount you can borrow with an FHA-insured mortgage. FHA sets limits according to geographic location with higher limits for more expensive housing markets. Loan limits increased for 2020 giving buyers more purchasing power. This article explains 2020 FHA loan limits for low-cost and high-cost areas so you understand how they work.

What Are FHA Loan Limits?

FHA insures mortgages made by approved lenders, allowing buyers to get loans with lower down payments and credit scores. In return for insuring the loan, FHA charges an upfront mortgage insurance premium and annual fee. All FHA loans have maximum dollar amounts that can be borrowed based on FHA’s loan limits.

Limits vary by county and are based on median home prices in that area. The higher the median price, the higher the loan limit. There are two main loan limits

• Floor – The low-cost area loan limit applies nationally

• Ceiling – The high-cost area loan limit applies in pricier markets

Actual limits for each county fall somewhere between the floor and ceiling. FHA releases new limits annually.

How Are FHA Loan Limits Determined?

FHA loan limits are calculated using a process mandated by Congress:

• Median home prices are measured for each metropolitan area and county.

• Any area with a median price above a set threshold is eligible for the maximum “ceiling” loan limit.

• Areas at or below the threshold get the lower “floor” loan limit.

• Specific county limits fall between the floor and ceiling based on their median prices.

FHA loan limits tend to increase year-over-year as home values rise nationwide. Higher limits give buyers increased purchasing power.

FHA Loan Limit Changes for 2020

On November 27, 2019, HUD published new loan limits for 2020. The changes:

• Increased the floor – The low-cost limit rose from $314,827 to $331,760, a 5.4% increase.

• Increased the ceiling – The high-cost limit increased from $726,525 to $765,600, a 5.5% boost.

• Raised limits in many counties – Actual 2020 FHA loan limits rose in over 95% of U.S counties.

These increases follow rising home values measured in FHA’s latest housing price survey. Higher limits allow FHA borrowers to purchase more expensive properties, especially in high-cost markets.

How High Are FHA Loan Limits in High-Cost Areas?

The FHA national ceiling is the maximum loan limit used in the highest-cost markets. For a 1-unit property in 2020, FHA’s ceiling is $765,600. This high-cost limit applies in the following areas:

• Most of California – Including Los Angeles, San Francisco, San Diego and many surrounding counties

• New York City metro

• Washington D.C. metro

• Seattle metro

• Portland metro

• Honolulu metro

• And other select high-price markets

To qualify for the $765,600 ceiling, an area must have median home values of $453,100 and above. See a full list of 2020 high-cost counties.

What Are FHA Loan Limits in Moderate and Low-Cost Areas?

Any area with median prices below $453,100 gets a loan limit between the floor and ceiling based on its specific housing costs. For example:

• Cook County, IL – Chicago metro area

  • 2020 Limit: $647,200

• Maricopa County, AZ – Phoenix metro

  • 2020 Limit: $510,400

• Wayne County, MI – Detroit metro

  • 2020 Limit: $402,350

While not as high as the ceiling, these counties still received nice boosts for 2020. See all FHA loan limits by state and county.

How Do FHA Loan Limits Work for Condos?

FHA places a cap on the total number of FHA-insured mortgages within a condo project. Once the cap is hit, no more FHA loans can be made in that community. For 2020, these condo unit limits were raised:

• Established condo projects – Increased from 30% to 35% of total units

• New condo projects – Increased from 10% to 15% of total units

These changes allow more buyers to use FHA financing when purchasing condos. FHA loan limits themselves don’t differ between single-family homes and condos.

Tips for Using FHA Loan Limits

When shopping for a home with FHA financing, keep these tips in mind regarding loan limits:

• Check your county limit before house hunting – Know the max you can borrow.

• Loan limits don’t cap your budget – You can still buy a more expensive home by making a larger down payment.

• Consider family members on your loan – Spouses and parents can help you qualify to borrow above the limit.

• Apply in areas nearing cutoff dates – FHA limits expire at the end of each calendar year.

• Work with an experienced lender – They can help you navigate FHA’s loan limits.

The Bottom Line

FHA loan limits are maximum mortgage amounts set by FHA for each U.S. county. Limits range from a national floor up to a ceiling for high-price areas. Understanding these limits helps borrowers evaluate their homebuying power with an FHA loan.

Higher FHA loan limits for 2020 allow buyers to purchase more expensive properties, especially in costly markets like California. Yet limits remain low enough to keep FHA affordable for low- to moderate-income borrowers. Connect with a lender to see what you can qualify for in your area.