Updated Limits For FHA Loans In Southern California

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The Federal Housing Administration (also known as FHA) changes their loan limits yearly. If you are buying a home in the near future and would like to to use an FHA loan, it is essential to be familiar with what these limits are and how they might fluctuate. For this year, in many areas, the limits have gone up to reflect rising home prices. Here is an overview of the updated limits for FHA loans in Southern California.

Definition of FHA Loan Limits

Loan limits are maximum loan values that comply with an FHA loan. The loan value is not equal to the purchase price. For instance, if you find a house for $ 200,000.00 and your down payment is 3.5 percent , then your loan value comes out to $ 193,000.00 .

How Are FHA Loan Limits Calculated

FHA loan limits differ by market. Median real estate values are compared to limits for national conforming loans. Conforming loans comply with the Fannie Mae and Freddie Mac rules and may be sold to secondary mortgage markets. FHA takes 65% of the limit for conforming loans as their floor in low cost markets. Low cost markets are those where 115% of the median property sales price is lower than 65% of the conforming limit. For high cost markets, the limit may reach 150% of the limit for national conforming loans. High end communities are those where 115 percent of the median real estate value exceeds 150% of the limit for national conforming loans.

Updated Limits For FHA Loans In Southern California

The loan range is between $271,050 and $625,500. Thus, in no case will it go less than $271,500 or exceed $625,500. Both the low and high limits are the same as the previous year, but many cities fall in between and will thus notice an adjustment for 2016. Additionally, there are specific limits for specific property types. In improvingmarkets, the FHA loan limits changed significantly for 2016. This will enable buyers to better compete for homes for sale and up their purchase price.

Los Angeles, Single Family 636,150
Los Angeles, 2-family 814,500
Los Angeles, 3-family 984,525
Los Angeles, 4-family 1,223,475

You can find specific limits at https://entp.hud.gov/idapp/html/hicostlook.cfm.

Why Is It Important to Understand Updated Limits For FHA Loans In Southern California

It is necessary to know your max purchase price during your property search. Purchasing a home beyond the max may require you to put more money at closing or require you to research another loan alternative. For example, if the loan limit in your market is $ 425,000.00 and you have 3.5% down, then your price limit is $ 440,414.51 . Purchasing a property for $ 449,222.80 will mean another $5,648 at closing to cover the difference. If you do not have it, this can be a big problem. Don’t forget that the max purchase price might not be exactly the same for every community that you are considering. It is helpful to know what they are while you are looking for a property.