Everyone wants to own a house today, but with a growing population and real estate prices hiking up, not everyone is able to do so with ease. The government of United States of America has been trying its best to help people have their own home to live in and has worked on some very famous schemes including Bridge loan, USDA loan (a rural development scheme), FHA (Federal Housing Administration) loan, etc. If you are a first-time homebuyer, who is looking forward to finally have a home of his own, FHA loan is a blessing for you.
FHA Loan Limits 2019 Complete Guide
Most people today actually prefer to also go for a home loan despite just hunting for a house to buy as it has become quite convenient and an easy to go method. The good thing about FHA loan or Federal Housing Administration loan is that you get a huge benefit when it comes to the rate of down payment which is merely 3.5% while other loans usually require 10-20% of down payment to be made.
The Federal Housing Administration loan or the FHA loan was created under the National Housing Act 1934; the prime focus of this loan scheme was to decrease the rate of unemployment, spike up the rate of home construction. The administration, however, doesn’t do all of it on its own but rather hires agencies and lenders to work for them who in turn offer loans to the common public.
There have been several amendments and changes in this loan scheme since 1950, 1960, to the years of 1974, 2007 and 2012. U.S. Department of Housing and Urban Development approves certain private lenders that work for this administration by being FHA approved. One can easily look for these loans with mortgage brokers or lenders that work under the Federal Housing Administration.
To understand FHA loan better, we would be discussing following topics in a brief: How does FHA loan works, new FHA loan limits 2019, FHA high balance loan limits, FHA county loan limits and FHA loan income requirements. We would also understand in short, few benefits and disadvantages of FHA loans.
Let’s start with understanding more about the FHA loan itself and then moving on with other topics:
How Does Federal Housing Administration Loan Works?
- Federal Housing Administration actually approves certain lenders (like banks) that in turn lend you money for a mortgage while the administration takes care of the loan and its safety.
- You are required to have a credit score of about 580.
- You pay through MIP (Mortgage Insurance Premium) for the guarantee that FHA offers you with annual MIP or an upfront MIP.
- Some types of FHA loans are- Federal Housing Administration 203k Improvement Loan, Home Equity Conversion Mortgage, 245(a) loan, Federal Housing Administration’s Energy Efficient Mortgage Program.
- Overall these are a few reasons that make FHA loan a very popular choice between new homebuyers.
New FHA Loan Limits 2019
- Federal Housing Administration/ new FHA loan limits 2019 has been raised for the year, but so have raised the minimum cost.
- The new FHA loan limits 2019 are going to cause more benefit to the people who fall in the bracket of low and moderate-income home buyers in most areas of USA.
- The low-cost area mortgage limits for one unit is about $314,827, for two units is $403,125, or three units is $487,250, for four units is $605,525.
- The high-cost area mortgage limits for one unit has been raised, for one unit it is $726,525, for two units it is $930,300, for three units it is $1,124,475 and for four units is $1,397,400.
- The lending amounts for the loan programs are fixed by the Federal Housing Finance Agency or FHFA, and one should know that the prices change as per the various counties and are different in each.
FHA High Balance Loan Limits
- There are various factors that affect the Federal Housing Administration or FHA high balance loan limit including the type of house needed, county costs and their limits, units (the limits are obviously higher for unit 1, unit 2, unit 3 or unit 4).
- In 2019, the FHA high balance loan limit has raised, even the floor price is $314,827.
- It is important to remember that FHA is actually a mortgage insurer and quite very home- buying friendly.
- The high balance loan limit for Federal Housing Administration loans usually ranges from $726,525 for a 1-unit home to $1,397,400 for a 4-unit home which can be easily understood as a multi-family home.
FHA County Loan Limits:
- Federal Housing Administration or FHA county loan limits are usually varying from county to county as the several factors on which the limit is decided on, keeps changing.
- The FHA county loan limits for low-cost areas (like Winkler County, Benson County, McDowell County, Ida County, La Salle County, Calhoun County, etc.), where the prices are the least usually is $484,350 and the mortgage limits there for the year 2019 is 65% of the limit mentioned.
- For high cost areas, the limit mostly ranges from $726,525 for 1-unit homes, $930,300 for a 2-unit home, $1,124,475 to $1,397,400 for 4-unit home. The mortgage limit there is set at 150% of the national limit. Some high-cost areas include Loudoun County, Howard County, Morris County, Los Alamos County, Sussex County, Fairfield County, etc. that have a considerably higher cost for homes.
- There are also some exceptional areas where the loan limit costs are very high like the Virgin Islands, Hawaii, Alaska, Guam, etc. where the construction costs are skyrocketing. Hence, the Federal Housing Administration loan limits are highest in these places. For a 1-unit home, it is $1,089,787, for a 2-unit home, it is $1,395,450, for a 3-unit home, it is $1,686,700 and for a 4-unit home or a multi-family home, it is as high as $2,096, 100.
FHA Loan Income Requirements 2019
- It was recorded that about 82% of people who bought FHA loans were the ones who bought their first home while about $6,600 was the average down payment made on Federal Housing Administration loans.
FHA loan income requirements are something that cannot be ignored while planning for it by those who wish to buy their new home as it is something that will help them with the process by making it smoother and easier.
- The first thing that is required to be remembered by anyone interested in knowing about FHA loan income requirements is regarding credit score. If your credit score is about 580+ then you have to pay a down payment of about 3.5%, while if your credit score is more than 500 but lesser than 580 then you have to pay a down payment of about 10%.
- Your ability to afford the mortgage loan, repayment history, verification of job or even income is a few things that are considered closely in an FHA loan.
- It is recommended that one should increase the credit score above 580 before applying for the Federal Housing Administration loan.
- Mortgage insurance is required; also applicant should be at least 18 years in age.
- The debt to income ratio is needed to be about 43% maximum of the applicant and a minimum 2 years of employment history is required as a must and without a doubt the home bought shout be occupied as a primary residence.
- FHA loans are also suitable for those who have received down payment as a gift or cannot afford a huge down payment.
FHA loans are much easier to apply for and way more affordable to possess when compared to other loan options for people who are looking for buying home loans. Also, the interest rates are quite high in other loans but in Federal Housing Administration Loan, they are fairly lower. Refinancing is much easier with FHA loans as well.
FHA loan Limits Guidelines
The method of refinancing used in FHA loans is streamline refinancing which includes no verification of income, lowers the mortgage insurance rate, there is no requirement of a home appraisal by any FHA home appraiser, and it also lowers the interest rate further. But you are required to have an FHA loan first, and pass the waiting period spanning for about 200+ days and also your FICO score must be above 620.
But one should also consider the problems that come along while going with the Federal Housing Administration loan and not any other conventional one. Some of these include important factors like accepting the lower loan limits, the paperwork required would be way more, and only low median home buyers or first-time homebuyers are mostly benefitted from this loan method.
However, overall this is a good way of choosing a home loan and buying a house but considering to take help of a financial advisor or loan officer to guide you is the best thing you can do to make sure you are not doing something wrong and so that you get a clearer picture of what your finances are going to be involved in the very future, which is something you should always take care of FHA Loan Limits.