The Federal Housing Administration (FHA) issued its 2023 FHA loan limits in California and the good news for homeowners is that they’ve increased their California FHA loan limits for most areas. The FHA increase in loan limit size is a big win for homeowners in California as it will open the door to additional opportunities for many current and potential homeowners.
As it’s been reported in the news; we’ve seen significant jumps in California housing prices over the last 12 months and because of this FHA is able to raise their floor and ceiling loan limits.
2023 California FHA Loan Limits
- $472,030 (baseline) most counties
- $1,089,300 in some high-cost counties
The FHA loan limit increase will open the door to more homeowners that want access to the FHA loan program. These limits apply to purchase and refinance transactions throughout the state of California.
FHA Nationwide:
The FHA nationwide increase from the previous level of $420,680 to $472,030 is just over a $51,000 increase. In high-cost areas the FHA loan limit goes from $970,800 to $1,089,300 – that is an increase of over $118,000!
This increase will allow homeowners new opportunities and should help keep housing stable. All-time low mortgage rates in 2021 helped home sales however that may change in 2022 (mortgage rates were increasing heading in 2022).
The most popular Federal Housing Administration loan program is the 30-year fixed-rate loan program and the 15-year fixed-rate loan program and those will continue to be offered in 2023.
Why the increase?
According to the Federal Housing Finance Agency (FHFA) the price index, the price of homes continues to rise. The strong housing market in 2022, helped by all-time low-interest rates, pushed values higher which allowed the limits to be raised. Every year FHFA announces an update to loan limits; some years it increases and some years it remains flat.
If you’d like a county-by-county breakdown (for each state) then check out the easy-to-use search function on HUD’s website. Before raising the FHA loan limits; the Federal Housing Finance Agency raised conforming loan limits across the country from $647,200 to $726,200. That is a sizable increase and it ultimately will help thousands of homeowners in California.
Higher Loan Limits and Higher Mortgage Rates
If you live in one of the high-cost counties and want an FHA loan amount between $472,030 and $1,089,300 you are going to pay a higher interest rate than someone who has a loan amount at or below $472,030. The process and general qualifications are the same but the interest rate is higher.
How much higher?
It mostly depends on the market but generally speaking your interest rate is going to be between 0.125% and 0.375% higher than those with a loan amount at or below $472,030.
As it’s been reported in the news; we’ve seen significant jumps in housing prices over the last 12 months and because of this FHA is able to raise their floor and ceiling loan limits.
Here Are The California FHA Loan Limits For Previous Years
Below are the FHA loan limits in California for 2018 to 2022.
2022 FHA loan limits in California
- $420,680 (baseline limit)
- $970,800 (high-cost counties)
2021 FHA loan limits in California:
- $356,360 (baseline limit)
- $822,375 (high-cost counties)
2020 FHA loan limits in California:
- $331,760 (baseline limit)
- $765,600 (high-cost counties)
2019 FHA loan limits in California:
- $314,827 (baseline limit)
- $726,525 (high-cost counties)
2018 FHA loan limits in California:
- $294,515 (baseline limit)
- $679,650 (high-cost counties)
A Great Option For Some Homeowners
An FHA loan is not for everyone however it does provide an opportunity for thousands of Californians every year to either refinance their current mortgage or purchase a new home.
FHA loan programs typically come with lower rates (compared to conforming loan programs) however they do come with Mortgage Insurance (MI). More on what Mortgage Insurance is below.
Mortgage Insurance:
Do you know FHA loans come with Mortgage Insurance?
Mortgage Insurance (MI) is not homeowners insurance. Mortgage Insurance is an insurance policy that you pay each month (along with your mortgage payment, property taxes, and property insurance) that protects the lender in case you default on your loan.
While no one wants to pay an extra payment each month; the FHA loan program does open the door to new opportunities for those with less than perfect credit, high debt-to-income ratios, and/or low downpayment.
The program is not perfect but is great for certain current and potential homeowners. All FHA loan limits in California, standard and high cost are subject to Mortgage Insurance – no exceptions.
There is also an Upfront Mortgage Insurance Premium that is paid at the time of closing. The payment is one lump sum and is either added to the loan or the interest rate is increased to cover the cost. For more information about Mortgage Insurance and FHA loans in general please be sure to check out our FHA home loan guide.
Paying Off An FHA Loan:
When you go to pay off an FHA loan, under the old FHA loan limits in California and the new limits for 2021, you’ll owe daily interest. Unlike Conforming loans, you’ll owe daily interest for the entire month no matter what day you close. For Conforming loans, you’ll only owe interest to the day your loan is paid off.
So if you are selling your home or if you are refinancing your current mortgage, and you have an FHA loan, you’ll want to close and payoff the original FHA mortgage at the end of the month (rather than the first few weeks).
Interested In Conforming Loan Limits?
Some homeowners are looking for Conforming Loan Limits and there are additional opportunities for homeowners under Fannie Mae or Freddie Mac lending guidelines. As mentioned above the ceiling for conforming loan amounts was also raised recently and this should help the housing market in 2019.
At JB Mortgage Capital, Inc. we offer low FHA mortgage rates and one-on-one personal service. If you are looking for a new FHA mortgage please be sure to give us a call at 1-800-550-5538 or send us a message from our website.
