Each year, FHA reviews average selling prices of homes in different regions and adjusts loan limits that apply to each. Additionally, they review the overall floor and ceiling restrictions for FHA loan amounts. If you plan to buy a home with an FHA loan, updated FHA loan limits for 2017 could impact your home buying plans.
What Are Loan Limits?
Loan limits are the maximum loan amounts allowed for a given loan program. It is less than a buyer’s purchase price since buyers typically make a down payment. For example, for a $420,000 purchase, if a buyer makes a 10% down payment, the loan amount would be $378,000. FHA loan limits represent how much can be borrowed for an FHA loan. Buyers needing more than the limit would need to use a different loan program (i.e. jumbo loan).
National Conforming Loan Limits
Before looking at FHA loan limits, it is important to understand national conforming loan limits. Conforming loans are conventional Fannie Mae and Freddie Mac loans that are sold into the secondary mortgage market. The limit is set by the Federal Housing Finance Agency. For 2017, the national conforming loan limit is $424,100. Any loans above that amount are non-conforming (i.e. jumbo loans and other mortgage programs).
FHA Loan Limit Floor and Ceiling
FHA refers to the national conforming loan limit to calculate the floor and ceiling to their loan limits. The FHA loan limit floor is 65% of the conforming loan limit, or $275,665. The ceiling is 150% of the conforming loan limit, or $636,150. These are both increases from previous years.
What do these figures mean? In lower priced markets, the FHA loan limit for 2017 will be $275,665 even though median home prices in the area are much lower than that. In extremely high priced markets, the loan limit will be $636,150 even though median home prices may be much higher. Many areas will fall somewhere in between that range of $275,665 – $636,150 depending on median home prices in 2016. These figures apply to single family homes. Multi-family properties have different limit floors and ceilings.
Massachusetts FHA Loan Limits for 2017
In Massachusetts, FHA loan limits for 2017 are determined by county. Below is a complete list of limits for single family homes.
$408,250 Barnstable County
$275,665 Berkshire County
$636,150 Dukes County
$598,000 Essex County
$275,665 Franklin County
$287,500 Hampden County
$287,500 Hampshire County
$598,000 Middlesex County
$636,150 Nantucket County
$598,000 Norfolk County
$598,000 Plymouth County
$298,000 Suffolk County
$287,500 Worcester County
Impact of Changes
In many areas, the loan limits increased for 2017. For home buyers, this means the potential for a higher purchase price (assuming that they qualify for a higher payment). Eastern MA markets have seen rising home prices and bidding wars over the last few years, so the ability to borrow more money could allow FHA homebuyers to better compete in these areas. In addition to higher FHA loan limits for 2017, FHA also announced lower monthly mortgage insurance premiums. Read our blog next week for more details! This is all great news for homebuyers in Massachusetts!