FHA Loans for Buyers in High-Cost Counties Near the Limit

The Quick Read: The county loan limit caps the mortgage, not the price of the house. In an expensive county, a home priced near that cap usually means more cash from you than the 3.5% minimum. The limit follows the property’s county and unit count, and it resets every year. Check your county’s number before you fall in love with a listing.

What Does a County Loan Limit Actually Cap?

It caps the loan. It does not cap what you can pay for a home. A buyer with a bigger down payment can buy a more expensive house and still borrow at or under the limit.

FHA loans are made by private lenders. The government insures them. That insurance is why the program has a lower down payment and looser credit rules, and the cost of it lands on you as mortgage insurance.

Here is the part that trips people up. The limit applies to the base loan amount. That is the mortgage before any financed upfront premium is stacked on top. HUD’s Handbook 4000.1 glossary separates the base loan from the total loan amount for exactly this reason. So the upfront premium does not eat into your county limit. It rides on top.

How Does a County Get Its Limit?

The federal government sets FHA limits by county and metro area, then resets them each year. Every area has a floor and a ceiling. Low-cost counties sit at the floor. The most expensive counties sit at the ceiling, which matches the top conventional limit for a single unit. Counties in between scale with local home prices.

The HUD single-family lender page publishes the annual floor and ceiling and says which case numbers each year’s limits apply to. A case number is the file ID the lender pulls for your FHA loan. The date it is assigned decides which year’s limits you get.

Two quirks matter in practice:

• In a metro area, the limit follows the county with the highest median price in that area. Neighboring counties can share a limit even when their prices differ.
• The floor is far below the conventional baseline. A price that fits conforming limits in a county may still sit above the FHA limit there.

Higher special ceilings exist for Alaska, Hawaii, Guam and the U.S. Virgin Islands. HUD’s FHA Connection background page explains that county limits are set locally and listed by unit count. Read the current figures for those areas straight from HUD.

I won’t quote county dollar amounts here. They change every year, and the number that matters is the one for your property.

How to Look Up Your Limit

1. Get the property address and confirm the county.

2. Confirm the unit count. A one-unit home and a fourplex have different limits.

3. Open HUD’s mortgage limits lookup. Search by state, county or metro area.

4. Read the limit for your unit count and the right year.

5. Ask your loan officer to confirm it against the case-number date.

Your lender runs this check anyway. Run it yourself first so you shop in the right price range.

How the Loan Is Sized, Step by Step

Think of it as a series of caps. The lowest one wins.

1. Find adjusted value. Start with the lesser of the sales price or the appraised value. Your minimum investment is figured on that same lesser number.

2. Apply the leverage test. Across the wholesale programs Lendmire places FHA files with, maximum financing is 96.5% of value for a purchase. That requires a 3.5% minimum investment and a decision score of 580 or higher.

3. Compare to the county limit. The base loan can’t go above the limit for that county and unit count.

4. Take the lower number. Near the limit, the county cap often binds first. Far below it, the 96.5% test does.

5. Add the upfront premium. The upfront mortgage insurance premium is 1.75% of the base loan, and it is typically financed. That raises your total balance but not your base loan.

6. Underwrite the file. The lender reviews credit, income, debts and reserves.

That sequence is the whole mechanic. Most confusion comes from skipping step 4.

Where Does “Near the Limit” Begin?

You are near the limit when 96.5% of the lesser of price or appraised value gets within shouting distance of the county cap. The test is simple. Take your target price, multiply by 96.5%, and compare the result to your county limit. If the result is above the limit, you are over it, and the limit controls.

Three zones show how this plays out. These are percentages and plain words, not dollar illustrations.

The “over” zone is where buyers get surprised. Say you offer on a home where 96.5% of the price runs past the county limit. The lender can only lend up to the limit. Everything above that is yours in cash, on top of closing costs and any reserves.

The same thing can happen after the offer. An appraisal below the contract price shrinks adjusted value. A loan already sitting at the cap gets no extra room, and the buyer covers the difference or renegotiates.

What Happens to the Monthly Budget Near the Cap?

The loan stays at its largest allowed size, so the monthly carry is as heavy as FHA allows for that county. Two mortgage insurance pieces drive it:

• Upfront premium: 1.75% of the base loan, usually financed.
• Annual premium: it runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. It is paid monthly.

Duration is the part many buyers miss. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At 90% LTV or less, it ends after eleven years. A bigger down payment near the cap can cut the premium tier and the duration, with a long-run payment effect. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.

Larger base loan amounts also fall into a higher premium tier. Ask your loan officer which tier your base loan lands in. The mortgage insurance premium is a program fact, not a price quote, and your Loan Estimate shows how it applies to your file.

Budget for ratios too. The base pair on most files is 31/43. That means housing costs up to 31% of income and total debts up to 43%. Documented compensating factors, such as strong reserves, can stretch to 40/50 at the top tier. The automated finding governs most files. Everything is subject to lender guidelines and full file review.

Credit Score and Cash: The Other Cliff

At the limit, your credit tier changes how much cash you need at the same price. HUD’s minimum decision credit score Q&A says scores under 500 are ineligible. Scores of 500 to 579 are capped at 90% LTV. Scores of 580 and up qualify for maximum financing. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.

That 500-579 tier is a HUD rule. The wholesale programs Lendmire works with start at 580. Individual lenders can also add their own stricter requirements, called overlays.

If only a non-occupant co-borrower has a credit score, the lender has to downgrade the file and underwrite it manually. A non-occupant co-borrower is allowed, but the borrower who lives there should carry the credit profile where possible. Borrowers with thin or non-traditional credit can reach maximum financing, but the file is underwritten by hand.

HUD’s score methodology is also in transition, with a newer approach tied to case numbers assigned after a set cutoff. If your case number date sits near that line, ask your loan officer which rule applies. This article does not guess at the new thresholds.

Closing Costs, Contributions and the Cash Gap

Closing costs and the upfront premium are separate from your down payment. The 6% limit on seller or other interested-party contributions is one way to cover some of those costs. Contributions above the cap, or above actual costs, are treated as price inducements and reduce the price used for the loan math.

One caution: contributions generally can’t count toward your minimum required investment. They help with costs, not with your 3.5%. And they don’t fix a limit gap. A seller credit doesn’t raise the county cap.

The CFPB’s FHA loan page suggests getting quotes for more than one loan option and comparing total costs. For a buyer near the limit, that is sound advice.

If Your Price Is Over the Limit: Your Options

FHA insures loans only up to the county limit. There is no exception process. You pick a path.

Honestly, the first and last options are the toss-ups. More cash costs you liquidity right when you will want a reserve cushion. Waiting can help if limits rise, but the market may rise faster than the limit does. A conventional or jumbo loan can fit a larger purchase. It asks different things of your credit, down payment and mortgage insurance, so compare the full picture before switching.

Multi-Unit Homes and Special Cases

Owner-occupied homes of one to four units. Higher limits apply to two-, three- and four-unit properties. The home must be your principal residence, which means you live in one of the units. In high-cost counties that can stretch your buying power, but the unit count has to match your lookup.

If you are asking whether FHA works for a second home or rental, the answer is one sentence: it doesn’t, because occupancy decides the leverage, and FHA is for the home you live in.

Refinancing has its own caps. An FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review, but it needs a net tangible benefit. The FHA rate-and-term refinance with an appraisal reaches 97.75% on a principal residence you have occupied for the previous twelve months. The FHA cash-out reaches 80% LTV on a home owned and occupied for 12 months before the case number. County limits shape those loans too. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

HUD’s waiting periods after credit events are HUD rules, not network promises. Two years from a Chapter 7 discharge and three years from a foreclosure are the usual markers.

Key Terms Defined

Base loan amount: The mortgage before any financed upfront premium. The county limit applies to this number.

Total loan amount: The base loan plus the financed upfront premium.

Adjusted value: The lesser of the sales price or appraised value, used to size the loan.

Floor and ceiling: The lowest and highest county limits FHA sets each year. Most counties sit between them.

Case number: The FHA file ID assigned to your loan. Its date decides which year’s limits apply.

Overlay: An extra rule a lender adds on top of FHA’s own guidelines.

Decision score: The credit score FHA uses to set your maximum financing.

Common Mistakes Near the Limit

• Treating the limit as a price cap. It caps the loan only.
• Assuming one national number. Limits are county by county and change annually.
• Forgetting the unit count. A duplex has its own limit.
• Counting the financed premium against the cap. It sits on top of the base loan.
• Planning on a seller credit to cover the gap. Contributions don’t raise the cap.
• Skipping reserves. Putting everything into the gap leaves nothing for repairs.

Next Step

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Lendmire is a mortgage broker that arranges these loans through wholesale lenders. This is not a commitment to lend. Bring your target price and county, and a loan officer can walk through the limit math with you.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Handbook 4000.1 Glossary

2. HUD FHA Lenders: Maximum Mortgage Limits

3. FHA Connection: Mortgage Limits Business Background

4. HUD FHA Mortgage Limits Lookup

5. HUD Q&A: Minimum Credit Score

6. CFPB: FHA Loans