The Federal Housing Administration (FHA) reviews their mortgage limits on an annual basis. If you’re buying a home in 2016 and intend to use a FHA mortgage, it’s useful to be aware of what they are and when they can change. For 2016, in many regions, the limits have risen to reflect the improving market. Many home owners who are interested in refinancing this year to take advantage of today’s low rates will want to at least check into a FHA loan, as for many borrowers, it’s the perfect loan product.
Understanding FHA Mortgage Limits
Mortgage limits reflect the most that can be borrowed on a FHA mortgage. The mortgage amount is lower than the purchase price. For example, if you buy a property for $ 575,000.00 and you have a down payment of 3.5 percent , then your mortgage amount will be $ 554,875.
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How Are FHA Mortgage Limits Calculated
FHA mortgage limits vary by county and city. Median home sale prices are analyzed against the national conforming mortgage limits. Conforming mortgages are those that comply with the Freddie Mac and Fannie Mae guidelines and may be sold to the secondary mortgage market. FHA calculates 65% of the limit for conforming mortgages to set their floor for low cost markets. Low cost markets are towns where 115% of the median home price is lower than 65% of the conforming limit. For high end markets, the limit goes as high as 150% of the national conforming mortgage limit. High cost areas are those where 115% of the median real estate value is higher than 150% of limits for national conforming mortgages.
San Jose, CA FHA Mortgage Limits For 2016
The mortgage range for San Jose this year is from $271,050 to $625,500. What that means is that in no case can you get a FHA loan less than $271,500 or more than $625,500 for single family homes. This floor and ceiling matches the figures from last year, but many cities fall somewhere in the middle. Additionally, there are varying limits for different types of properties (loan limits for duplexes & etc. are higher). In a majority of active markets, the loan limits changed significantly for 2016. This will enable prospective buyers to compete more aggressively for listings and improve their price range.
Santa Clara County, Single Family $625,000
Santa Clara County, Two Family $800,775
Santa Clara County, Three Family $967,950
Santa Clara County, Four Family $1,202,925
Additional figures are available at https://entp.hud.gov/idapp/html/hicostlook.cfm
Why Is It Important to Understand San Jose, CA FHA Mortgage Limits
If you’re pre-approved for a FHA mortgage, you must be aware of the San Jose, CA FHA mortgage limits for this year. Buying a home over the max may require a larger down payment or a different mortgage program. For example: the max FHA loan amount for a single family home in San Jose is $625,000 – and you have 3.5 percent down, then your maximum purchase price is actually $647,668. If you have a greater down payment – and you can put down however much you want on a FHA, so long as the loan amount is not less than the minimum – then of course you can buy a more expensive home, just be aware of the maximum loan limit.