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FHA Announces 2021 Loan Limits Starting at $356,362

The limit for Title II and reverse mortgages rises from this year’s base of $331,760. In high-cost areas, the limit can go as high as $822,375, up from $765,600 in 2020.

WASHINGTON – The Federal Housing Administration (FHA) announced the agency’s new schedule of loan limits for calendar year 2021 for its Single-Family Title II forward and Home Equity Conversion (reverse) Mortgage insurance programs.

Those limits will notably rise due to “robust house price appreciation,” FHA said in a release since current prices are factored into the statutorily mandated calculations FHA uses to determine each new year’s limits.

The new loan limits go into effect for case numbers assigned on or after Jan. 1, 2021.

Under the National Housing Act, as amended by the Housing and Economic Recovery Act of 2008 (HERA), FHA must set single-family forward loan limits at 115% of area median house prices, subject to a floor and a ceiling on the limits. FHA calculates individual mortgage limits by Metropolitan Statistical Area (MSA) and county.

However, Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade questioned the FHA loan limit increases.

“FHA has seen consistent increases in loan limits during the past few years, putting it in a position to serve a segment of borrowers that may be better-served by the conventional market,” Wade said in a media release from the Department of Housing and Urban Development (HUD). “FHA’s mission is to support low-to-moderate income borrowers, so why does the law permit FHA to insure mortgages up to $822,375? This is a question for Congress and the taxpayers who stand behind FHA to answer.”

In high-cost areas of the country, FHA’s loan limit ceiling increases to $822,375 on Jan. 1 from this year’s $765,600. In all areas of the country, FHA will increase its floor to a minimum of $356,362 from $331,760.

For homeowners seeking a reverse mortgage, the FHA-insured Home Equity Conversion Mortgage (HECM) maximum claim amount increases to $822,375 from $765,600. Current HECM regulations don’t allow the limit to vary by MSA or county; instead, the single HECM limit applies to all HECMs regardless of a property’s location.

According to FHA, the maximum loan limits for FHA forward mortgages will rise in 3,108 counties and will remain unchanged in 125 counties. By statute, FHA based each MSA’s median home price on the county within that has the highest median price.

The National Housing Act, as amended by HERA, requires FHA to establish its floor and ceiling loan limits based on the loan limit set by FHFA for conventional mortgages owned or guaranteed by Fannie Mae and Freddie Mac. The national conforming loan limit for 2021 is $548,250. FHA’s 2021 minimum national loan limit “floor” of $356,362 is set at 65% of the national conforming loan limit. This “floor” applies to those areas where 115% of the median home price is less than the “floor” limit.

Any area where the loan limit exceeds this “floor” is considered a high-cost area, and HERA requires FHA to set its maximum loan limit “ceiling” for high-cost areas at $356,362, which is 150% of the national conforming loan limit.

To find a complete list of FHA loan limits – some local limits fall between the floor and the ceiling – visit FHA’s Loan Limits page.

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