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2025 FHA Loan Limits
2025 FHA Loan Limits - Updated 12/18/2024
Adjustments to Federal Housing Administration (FHA) loan limits are specific to Metropolitan Statistical Areas (MSA) and counties and are updated annually. FHA loan limits are categorized by property type such as one-family, two-family, three-family, and four family, and can have higher loan limits for high-cost areas that can reach up-to $2,326,875 for FHA loans on 4-unit property types. The November 26th, 2024 update for FHA loans in 2025 can have an impact on mortgage applications in several ways.
More Homebuying Options
Although mortgage rate adjustments in 2024 continued to cool rapidly increasing housing prices, the median sales price of a home had increased. According to Federal Reserve Economic Data (FRED), the median sales price of a home increased over 35% from 2020 to 2022. This sudden increase in home prices tested FHA’s 2023 loan limits, specifically for potential first-time homebuyers looking to take advantage of FHA’s 3.5% down payment program. The biggest impact of FHA’s 2024 loan limit increase is the ability for potential homebuyers to utilize an FHA loan over a Conventional loan, especially in major metropolitan areas that have higher home prices. FRED’s median sales price in Q4 2022 was estimated at $479,500. Based on FHA’s 2023 loan limits, most non-high-cost areas would need more than a 3.5% down payment to purchase a home using an FHA loan. The adjusted 2024 FHA nationwide low- cost area loan limit increased to $498,257. This means that more homebuyers can use the FHA 3.5% down payment option without worrying about exceeding loan limits or sacrificing on home options. Metro areas such as Dallas-Fort Worth have FHA loan limits of $563,500 for single family homes. This is beneficial because Collin County ranks as one of the least affordable counties for housing affordability based on THAI data. The 2024 FHA loan limit increase is a tremendous benefit to homebuyers in today’s current housing market.
The 2025 FHA loan maximum helps more homebuyers qualify for the home of their choice. Based on data from Texas Real Estate Research Center, The average home price in McKinney, TX $565,966. With the previous FHA loan limit, a homebuyer looking to use FHA’s low down payment options would need a down payment greater than 3.5%. With the new 2024 FHA loan limit, a homebuyer in McKinney, TX can use FHA’s low 3.5% down payment option and shop for homes in the average home price range in McKinney. This benefits homebuyers in the Collin County and surrounding areas who prefer an FHA loan over a conventional loan. The ability to use an FHA program helps homebuyers with little or no credit history and a smaller down payment get a competitive FHA mortgage rate in comparison to similar qualifications with a conventional home loan.
Refinance with 2025 FHA Loan Limits
Conventional loan limits exceed the FHA loan maximum. The new 2025 FHA loan limit adjustment improves the likeliness of needing a lower down payment when buying a home in Plano, TX, and surrounding areas such as McKinney, TX or Allen, TX. The increase in loan limits also helps homeowners looking to take advantage of their home’s equity for home improvement purposes or other refinance needs. As the Fed target rate plateaus and shows signs of a mortgage rate decrease in 2025, consumers might find the lower FHA interest rate can reduce their monthly mortgage payment. This can help redirect the monthly savings towards higher rate credit card payments or to improve household budget. With the previous FHA max loan amount, homeowners could be limited to the amount of home equity they could access. With the 2025 FHA loan limit increase, homeowners needing to refinance their current loan for a lower payment have a greater opportunity to access FHA’s higher loan limits. For example, a homeowner who purchased a home at a higher rate on a conventional loan due to higher loan limit can now consider an FHA refinance at FHA’s lower rate. Plus, FHA loan qualifications can be easier than conventional making it simpler to refinance even with a lower credit score or higher debt-to-income (DTI) ratio.
Overall, FHA’s 2025 loan limit increase will have a positive impact on home loan applicants under any economic conditions we will experience in 2025. It is best to get familiar with the FHA county loan limits in your area to prepare for homeownership in 2025 or for homeowners looking to take advantage of an FHA renovation loan. Remember, FHA rates are lower than conventional loan rates. However, talk to our state licensed loan officer to ensure to account for FHA’s MI requirements before you consider an FHA loan.
Median home price increase between 2018 and 2023 based on FRED data.