2018 brought with it higher loan limits for most mortgage programs. The national conforming limit increased from $424,100 to $453,100. This increase caused most of the government-backed mortgage programs to follow suit.
The FHA 2018 Loan Limits
The FHA sets a floor and ceiling limit, which differs from the national conforming limit. However, they use the national conforming limit as the base.
The FHA’s floor limit is 65% of the national conforming limit. This year, this means the lowest maximum in certain areas of the country is $294,515. This applies to areas where 115% of the median home prices in the area are below $294,515. The maximum loan amount in these areas is then $294,515.
Areas where homes are worth more than the $294,515 are subject to the FHA ceiling. This is 150% of the conforming limit. This year, that means $679,650. This limit is reserved for ‘high-cost counties.’
The average county usually falls somewhere in between the $294,515 and $679,650 limits. You can view the limit for each county on the HUD website.
The VA 2018 Loan Limits
The VA loan for veterans also experienced an increase in the loan limits. These government-backed mortgages have a standard limit equal to the conforming limit. In a majority of counties, veterans may be eligible for a loan up to $453,100. Notice we said eligible and not ‘qualified.’ You have to prove you individually qualify for the loan before a lender can approve it. But, the ability to secure a loan up to that amount is available.
There are 220 counties where the VA loan limit is higher than the $453,100. The limit in these counties is based on the average house price in that area. The amounts vary from $454,250 to $721,000.
The USDA 2018 Loan Limits
The USDA is the unique program among the government-backed mortgages. Technically, the USDA loan does not have a loan limit. However, because of the income restrictions in this program, the limits generally don’t reach even the conforming loan limit.
USDA loans restrict who can use the program based on their income. The restriction applies to all household members. Any income coming into the home gets totaled. The USDA then uses this income to determine if you fall within their parameters based on your family size and the area you live. However, you do get to deduct childcare expenses and the cost of helping elderly or disabled members of the household.
Generally, your household income should not exceed 115% of the median income or the area. If it does, you’ll have to use a different loan program as the USDA program won’t be an option. It’s strictly for low to moderate income families that cannot secure funding from another source.
As you can see, the government-backed mortgages are a viable option for almost anyone this year. With much higher loan limits, borrowers have the ability buy a home in a rising housing industry that continues to get competitive. Of course, the loan you qualify for is based on your actual factors.
You must be able to prove that you can afford the loan. This means your debt ratio is within the parameters of each program and your credit score meets their requirements. The government-backed programs generally have flexible guidelines. The highest credit score required is a 640 on the USDA loan. FHA loans require a 580 and VA loans require a 620. They all have flexible debt ratio requirements, allowing you to have as much as a 43% debt ratio and still qualify.
If you are looking for a loan, the government-backed mortgages are a great option. They provide low-interest rates, low closing costs, and flexible guidelines. Consider all of your options when you shop for a mortgage so that you can find the one that fits your household’s needs the most.