FHA loan limit set to surpass $1 million in priciest markets

The Federal Housing Administration on Thursday unveiled 2023 limits for loans it guarantees, with the maximum amount surpassing $1 million in the priciest communities.

Maximum loan limits for FHA-backed forward mortgages will rise in 3,222 counties beginning on Jan. 1. In 12 counties, they will remain unchanged. The maximum amount permitted increases to $472,030 for mortgages of single-unit properties in designated low-cost areas to $1,089,300 in the highest priced markets within the continental U.S. The low-cost floor applies to areas where 115% of median home prices fall below the limit. The ceiling in Alaska, Hawaii and certain U.S. territories will also be set to a higher mark of $1,633,950 due to the cost of construction. 

"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," FHA Commissioner Julia Gordon said in a press release.

The 2023 floor and ceiling values both represent 12% increases from this year's limits of $420,680 and $970,800, respectively, and were determined based on the conforming size of $726,200 announced by the Federal Housing Finance Agency earlier this week. The floor is set at 65% of the conforming limit, while ceilings exceeding that amount vary based on median home prices within a county or metropolitan region. The FHA is required to set its loan limit ceiling at 150% of the conforming amount and is equal to the maximum in the government-sponsored enterprise market. Both markets have some high cost areas with elevated limits.

A few of the areas where the higher FHA ceiling limit will apply include greater New York City, the San Francisco Bay area, and Jackson, Wyoming. In other boom markets of the past two years, the FHA-limit for single-unit properties will rise to $586,500 in Boise, Idaho, $592,250 in Atlanta and $619,850 in Salt Lake City.

Housing groups have already asserted the conforming amounts are too high and allow more people to afford housing that might otherwise be able to outside government-related markets, potentially putting upward pressure on home prices that have been outpacing incomes. The increase in the FHA limit, particularly for higher-priced markets, will likely do nothing to alleviate those concerns.

The announcement of new limits also comes as several organizations and companies, including the government-sponsored enterprises, have highlighted increased affordability as a 2023 goal.

The 2023 FHA limits for two-unit mortgaged properties similarly rose to $604,400 in low-cost areas to a high-priced market ceiling of $1,394,775. For triplexes, guaranteed amounts increased to $730,525 and $1,685,850.

The FHA also released new maximum claim amounts for Home Equity Conversion Mortgages on Thursday, raising that value to $1,089,300, effective Jan, 1, regardless of the property's location. The 2022 maximum stood at $970,800.