FHA loan limits are derived from the loan limits adopted by the
Federal National Mortgage Corporation (Fannie Mae-FNMA) and the Federal Home
Loan Mortgage Corporation (Freddie Mac-FHLMC). The 2021 maximum conforming loan
limit for a single-family home will be $548,250.
That’s an increase of $37,850 from the 2020 baseline limit of $510,400. This
marks the fifth year in a row that federal housing officials have raised the
baseline.
LOW-COST AREA OR FLOOR
The FHA national low-cost area mortgage limits, which are set
at 65 percent of national
conforming limit of $548,250 for a one-unit Property,
are, by property unit number, as follows:
- One-unit: $356,362 (FHA limit can
be this low AKA the Floor)
- Two-unit: $456,275
- Three-unit: $551,500
- Four-unit: $685,400
HIGH-COST AREA OR CEILING
The FHA national high-cost area mortgage limits, which are set
at 150 percent of the national conforming limit
of $548,250 for a one-unit Property, are, by property unit number,
as follows:
- One-unit: $822,375 (FHA limit can
be this high AKA the Ceiling)
- Two-unit: $1,053,000
- Three-unit: $1,272,750
- Four-unit: $1,581,750
SPECIAL EXCEPTIONS FOR ALASKA, HAWAII, GUAM, AND THE
VIRGIN ISLANDS
Mortgage limits for the special exception areas of Alaska (AK),
Hawaii (HI), Guam (GU) and the Virgin Islands (VI) are adjusted by FHA to
account for higher costs of construction. These four special exception areas
have a higher ceiling as follows:
- one-unit: $1,233,550
- Two-unit: $1,579,500
- Three-unit: $90,9125
- Four-unit: $2,372,625
Maximum Mortgage Term
The maximum mortgage term may not exceed 30 years from
the date that amortization begins. FHA does not require that mortgage terms be
in five-year multiples. [1]
REFINANCES:
LTVS DICTATED BY LOAN PURPOSE
Cash-Out Refinance
Maximum Mortgage Amounts
- Standard
- Maximum Loan-to-Value The
maximum LTV is 80 percent (80%) of the Adjusted Value.
- Maximum Combined Loan-to-Value
(CLTV): The maximum CLTV is 80 percent (80%) of the Adjusted Value.
- Nationwide Mortgage Limit: The
combined mortgage amount of the first Mortgage and any subordinate liens
cannot exceed the Nationwide Mortgage Limit described in National Housing
Act’s Statutory Limits.
No Cash-Out Refinance
Maximum Mortgage Amount
- Maximum Loan-to-Value Ratio LTV
for a Rate and Term refinance is:
- 97.75 percent for Principal
Residences that have been owner-occupied for previous 12 months, or owner-occupied
since acquisition if acquired within 12 months, at case number assignment.
- 85 percent for a Borrower who
has occupied the subject Property as their Principal Residence for fewer
than twelve months prior to the case number assignment date; or if owned
less than twelve months, has not occupied the Property for that entire
period of ownership; or
- 85 percent for all
HUD-approved Secondary Residences.
MORTGAGE
INSURANCE PREMIUMS
FHA provides mortgage insurance on loans made by FHA-approved
lenders throughout the United States. FHA mortgage insurance provides lenders,
not borrowers, with protection against loss if a property owner defaults on
their mortgage.
FHA is funded by the mortgage insurance premiums it collects
from borrowers through the lenders making the loans. FHA sets the premiums paid
by the borrowers and they are based on the revenue needs of the FHA Mutual
Mortgage Insurance Fund (MMIF) to remain solvent and achieve the risk ratios of
liquidity, including future cash flows, vs. insurance in force established by
Congress. The Congressionally mandated capital ratio threshold for FHA is 2%.
That is the capital reserve account vs. the present balance of all loans
insured by FHA.
At the end of Fiscal Year 2019 the FHA was in a very healthy
financial position. For 2019 the fund’s net worth almost doubled from FY 2018
increasing from $34.8 Billion to $62.38 Billion. The capital reserve ratio was
a whopping 4.84%.[1]
This increase has caused significant pressure on FHA to reduce
mortgage insurance premiums to consumers, but that pressure has yet to impact
FHA.
Below are the current mortgage insurance premiums based on LTV,
Product, Loan Amount and Term. It also provides the duration (11years vs. full
loan term) that the insurance must remain in force and the consumer must pay
premiums. [2]
FHA has different premiums that are solely up-front mortgage
insurance premiums for loans made in the Hawaiian Home Lands referred to as
Section 247 mortgages.
RECENT FHA
UPDATES
Mortgagee Letter
2020-20
FHA changes as a result of the COVID-19 National Emergency.
Many of the recent changes adopted by FHA came in the form of
changes to FHA guidelines and rules due to restrictions put in place to fight
the COVID-19 virus. This course will focus on the FHA update associated with
the necessary lender accommodations outlined in ML 2020-05 and extended in
Mortgagee Letter 2020.20.
On March 13, 2020,
President Trump declared a National Emergency concerning the Coronavirus
(COVID-19) Outbreak and initiated actions to stem the threat to public health
and the American economy.
On March 27, 2020, HUD published Mortgagee Letter 2020-05,
through which the Secretary of HUD authorized flexibilities to the
re-verification of employment and Acceptable Appraisal Reporting Forms and
Protocols (Appraisal Protocols) by allowing exceptions for Exterior-Only and
Desktop Appraisal inspections in certain transactions. Due to the continuing
national emergency caused by the COVID-19 pandemic, HUD issued this 2020-20 to
extend the modifications issued in ML 2020-05.
Extension of the Effective Date of Mortgagee Letter 2020-05 by
2020-20 provided for ongoing tolerance of Reverification of Employment and
Exterior-Only and Desktop-Only Appraisal Scope of Work Options for FHA Single
Family Programs Impacted By COVID-19.
This 2020-20 Mortgagee Letter announces a re-extension of the
effective date of Mortgagee Letter 2020-05, published on March 27, 2020. This
second extension will allow industry partners additional opportunity to utilize
flexible guidance related to reverification of employment and appraisal
protocol for FHA Single Family Programs affected by COVID-19.
These changes apply to FHA Single Family Title II Forward and
Reverse Mortgage Programs.
