Why Did FHA Loan Limits Increase for 2024?
How do lenders get these limits, and what affects those limits?
FHA Loan Limits Are Set Annually
Federal law dictates FHA loan limits be established on an annual basis using specific types of data to inform the new rates.
A federal law known as the National Housing Act (NHA) and certain 2008 amendments help the FHA establish the limits in the new year. FHA and HUD typically announce these limits in the final weeks of the old year.
FHA loan limits are, by law, established at 115 percent of the median house prices in a given area. Those prices were higher in 2022 and 2023 than in previous years.
FHA Loan “Floor” and “Ceiling”
There is a low-end limit, also known as the “floor”. There is an upper limit called the “ceiling” for FHA loan limits. The annual review of these limits is intended to determine whether any changes are justified.
When the Federal Housing Administration announced higher FHA loan limits effective in 2024, it also announced limits for FHA Home Equity Conversion Mortgages (HECMs), which must undergo the same review process. But the methodology varies a bit for HECMs. Why?
HUD reminds FHA that HECM regulations don’t permit FHA reverse mortgages or HECM limits to vary by county. “The single HECM limit applies to all HECMs regardless of where the property is located,” according to HUD.gov.
Why FHA Loan Limits Increased for 2024
The FHA says loan limits increase due to increased costs in American housing markets.
One FHA/HUD press release notes loan limits increasing in your housing market may be due to “robust house price appreciation” in some cases. That was the reason rates increased the previous year. 2024 house prices may be cooling somewhat, but mortgage rates are still markedly higher.
When the New Loan Limits Take Effect
FHA loan limit increases do not take effect immediately. The new, higher FHA loan limits for 2024 are only offered for loans with FHA case numbers on or after January 1, 2024.
If you aren’t sure how the new FHA loan limits may affect your home loan, talk to your participating FHA loan officer. If you have an FHA loan case number assigned in the new year, the higher limits apply to you. If your case number was issued in the previous year, that year’s FHA loan limits apply.
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