Borrowers should know what the home loan limit in their housing market is–it’s the first step toward owning a home. Why should you use this loan limit calculator to see how much you can borrow? Because the limits will vary depending on the size of the property (one to four units), whether the housing market is in a high-cost, low-cost, or typical-cost area and you’ll want to know how much you can borrow far in advance for the purpose of budgeting and planning your mortgage.
About Home Loan Limits
What are home loan limits and how do they work? A loan limit is the highest amount you can borrow in that housing market and still be applying for a conforming loan. What’s a conforming loan? One that is at or below the loan limit for that area, set by county or zip code.
Loan limits are established annually. The Federal Housing Finance Agency sets a conforming loan limit for the year and these limits are the “cap” on the amount Fannie Mae and Freddie Mac will guarantee a loan for. Limits are subject to change from year to year.
Why are loan limits so important? Those who choose to purchase a home that is higher than the conforming loan limit (again, loans that are at or below the limit for that zip code) are permitted to do so but only as non-conforming loans AKA “Jumbo” loans. Jumbo loans will cost more, have higher interest rates, and will require higher credit scores.
Loan limits are not necessarily standard. Your loan limit may depend on the type of mortgage you seek. For example, FHA loan rules are different than VA home loan rules. Conventional mortgages may have different requirements from both VA and FHA loans depending on circumstances.
Loan Limit Based on Type of Loan Selected
To use this mortgage loan limit calculator to find out your loan limit, you’ll need to choose the type of loan right for you–conventional, VA or FHA (see below).
But you will also need to select the number of units your property has. Some borrowers are applying for home loans for a single-unit property.
Are you planning to buy a single-family home or a multi-family residential unit? The Calculator will ask you to select the type of property. Is the house you want to buy considered a detached home? These are single-unit properties–a typical suburban house is a great example. A duplex, on the other hand, is not a detached home but considered a two-unit property. You can buy a home with as many as four living units in most cases. Which loan is right for your needs?
A conventional mortgage is one that is issued by a lender and does not have insurance or guarantees from the federal government. A conventional loan can be conforming (at or under the loan limit) or non-conforming (a Jumbo loan). Conforming loans must follow Fannie Mae and Freddie Mac guidelines.
Conventional loans can feature fixed-rate or adjustable rate mortgages, they can require mortgage insurance (generally a 20% down payment is required to avoid paying mortgage insurance) and conventional loans can be used for both owner-occupied residences and investment properties depending on the lender, borrower qualifications, etc.
Conventional loans feature different loan limits for high-cost areas including Alaska, Hawaii, and other regions that have higher housing costs than typical housing markets.
FHA mortgages are open to any financially qualified borrower. Contrary to popular belief, FHA home loans are not restricted to first-time home buyers or those who are economically disadvantaged. FHA mortgages are guaranteed by the government, which makes them easier to qualify for due to reduced risk for the lender. FHA loans have lower FICO score requirements than many conventional mortgages and the FHA-required down payment requirement for FHA loans is 3.5% for those with credit scores at 580 or above. (Lender requirements may vary.)
FHA home loans, like conventional mortgages, have loan limits based on county/zip code, and FHA Jumbo loans are also possible depending on the lender and other variables. Jumbo loans are harder to qualify for–you may not qualify for a jumbo loan with non-traditional credit or lower FICO scores.
FHA loans have a maximum term of 30 years, but the FHA does not require the loan term be arranged in five-year multiples.
VA home loans are a unique type of government-backed mortgage offered to military members, veterans, and certain surviving spouses of those who have died as a result of military service. VA loans are NOT offered to the general public, but for those who qualify, the loan features no required mortgage insurance premium, flexible lending guidelines, no VA-specified credit score minimums (your lender’s requirements will apply), and most importantly of all, NO DOWN PAYMENT in typical cases.
The VA home loan program is also unique in that it has NO VA loan limits for those who have full VA loan entitlement to use on the transaction. Those who do not have 100% VA loan entitlement ARE subject to mortgage loan limits similar to FHA loan limits for their zip code or county.
Calculating the loan limits for VA loans regardless can be important as you may experience higher FICO score requirements and higher interest rates for loans that exceed the loan limits in your area. Much will depend on the individual lender’s standards and other variables.
About the Author
Joe Wallace has been covering mortgage and financial topics since 1995. His work has appeared on ABC, The Pentagon Channel, MilitaryBenefits.info plus a variety of print and online publications. He is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.