The Federal Housing Administration (FHA) has announced new loan limits for calendar year 2023 for its Single Family Title II forward and Home Equity Conversion Mortgage (HECM) insurance programs. Loan limits for most of the country will increase in the coming year due to house price appreciation during the first half of 2022, which is factored into the calculations the FHA uses to determine the limits each year.
“The loan limits announced today reflect steep increases in home prices throughout much of the country and will ensure continued access to FHA-insured mortgage financing despite those increases,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon.
The new forward mortgage loan limits are effective for FHA case numbers assigned on or after January 1, 2023:
Note that mortgage limits for the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands are adjusted by the FHA to account for the high costs of construction in those areas.
The maximum loan limits for FHA forward mortgages will rise in 3,222 counties, while in just 12 U.S. counties, FHA’s loan limits will remain unchanged. By statute, the median home price for a Metropolitan Statistical Area (MSA) is based on the county within the MSA that has the highest median price.
The HECM/reverse mortgage maximum claim amount will increase from $970,800 in calendar year 2022 to $1,089,300, effective for FHA case numbers assigned on or after January 1, 2023. This maximum claim amount is applicable to all areas, including the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
The FHA is required by the National Housing Act (NHA), as amended by the Housing and Economic Recovery Act of 2008 (HERA), to set Single Family forward mortgage loan limits at 115 percent of area median house prices for a particular jurisdiction, subject to a specified floor and a ceiling. In accordance with the NHA, FHA calculates forward mortgage limits by MSA and county.
The NHA requires FHA to establish its floor and ceiling loan limits based on the national conforming loan limit set by the Federal Housing Finance Agency (FHFA) for conventional mortgages owned or guaranteed by the government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac.
The national conforming loan limit for 2023 for a one-unit property is $726,200. FHA’s 2023 minimum national loan limit floor of $472,030 for a one-unit property is set at 65% of the national conforming loan limit. This floor applies to those areas where 115% of the median home price is less than the floor limit. Any area where the loan limit exceeds this floor is considered a “High-Cost Area.” In these High-Cost Areas, the FHA establishes varying loan limits above the floor based upon the respective median home prices in each area.
The NHA requires the FHA to set its maximum loan limit ceiling for high-cost areas at $1,089,300, which is 150% of the national conforming loan limit. Forward mortgage limits for the special exception areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands are adjusted further by FHA to account for the high costs of construction in those regions.
Additionally, the FHA-insured HECM maximum claim amount is calculated at 150% of the Freddie Mac national conforming limit of $726,200. FHA’s current HECM regulations do not allow the HECM limit to vary by MSA or county; instead, the single HECM limit applies to all HECMs regardless of where in the U.S. the property is located.