2021 can’t get here soon enough for a number of reasons, least of which is the massive increase in buying power HUD has given to FHA buyers. The 2021 FHA loan limits are out, and the base limit is up more than 7%. If you’re relying on an FHA loan to purchase a new home, that’s good news.
The 2021 FHA loan limit for the majority of U.S. counties is $356,362. That’s over $24,000 more in purchasing power than permitted by 2020’s $331,760 base limit. In areas where the base limit doesn’t reach the median home price, 2021 FHA high-cost limits are as high as $822,375.2021 FHA Loan Limit Lookup Tool
Why do FHA loan limits matter?
The more homes that fall within FHA’s loan limits, the more options FHA home buyers in higher price ranges have to choose from. This is good for buyers, sellers, and even neighbors.
Good for Buyers
Obviously, being able to buy a nicer home in a higher price range is a huge win for FHA home buyers. A higher maximum price may even open up previously unattainable neighborhoods. The bottom line for buyers is, as long as you qualify, having more homes to choose from at a higher price point is a good thing.
Good for Sellers
What if you were selling your home and a significant portion of homebuyers could never even consider looking at your home? Here’s a quick example:
Seller’s List Price: $365,000
In 2020, an FHA buyer could only borrow $331,760. They would need a $33,000+ down payment to make that work. An FHA buyer hoping to make only a 3.5% down payment won’t be looking at homes in this price range.
Now, in 2021, that same buyer can borrow $356,362, which easily exceeds the FHA loan amount after making a 3.5% down payment. This seller’s pool of potential buyers has grown massively, which improves their odds of receiving the price they’re looking for.
Good for Neighbors
The concept is simple. If sellers can demand a higher price and have a larger number of potential buyers, home prices will remain stable and likely continue to appreciate. If my new neighbor paid more than they would have in 2020 because of a higher FHA loan limit, my home should see a boost in value as well.
FHA loan limits tend to increase every year. Allowing buyers to spend a little more with an FHA loan generally benefits the entire housing market. FHA loans remain one of the best ways for homebuyers to become homeowners. The increased 2021 FHA loan limits will help more families reach that goal.
Fannie Mae and Freddie Mac conventional loan limits have increased.
The 2021 base conforming loan limit is $548,250.
The conforming high-cost limit is $822,375.