FHA Loans for High-Cost County Buyers: Where the Limit Applies

The Quick Read: The county where the home sits sets the largest FHA mortgage you can get. That cap moves between a floor and a ceiling and resets every year. Most expensive counties land somewhere between the two, so your exact county decides the number. Whether the cap or the loan-to-value test binds first depends on the price and the appraisal.

What the County Limit Actually Caps

An FHA loan is made by a private lender and insured by the federal government. That insurance is why a buyer can put down as little as 3.5%. It is also why the government sets a ceiling on how much it will insure in each county.

County loan limits apply to every FHA purchase, and they change every year. Across the wholesale programs Lendmire places FHA files with, the limit is one of the first things checked, because it decides whether the whole structure works.

Here is what trips people up. The limit is not a price cap. It does not say you can’t buy a home above a certain price. It says the base loan can’t exceed a set amount. Cash covers the rest.

Many buyers in expensive markets expect a single national figure. There isn’t one. Two neighboring metros can carry very different limits, and one metro can differ from the county next door. Anyone reading the FHA loan programs for the first time should treat the county number as the starting fact of the file.

Key Terms Defined

Floor: the lowest FHA limit, which applies in counties where home prices are modest.

Ceiling: the highest standard FHA limit, which applies only in the most expensive counties.

High-cost area: any county whose limit sits above the floor because local home prices are high.

Base loan amount: the loan before any financed upfront premium is added. This is the figure tested against the limit.

Lesser-of rule: the loan is sized on the lower of the purchase price or the appraised value.

Case number: the FHA identifier a lender orders for your file. Its assignment date decides which year’s limits apply.

Special-exception area: a place with higher construction costs, where the limit can run above the normal ceiling.

How the Loan Is Sized, Step by Step

Think of the maximum loan as the smaller of two tests. One is the county cap. The other is the loan-to-value test. Here is the order a lender works through.

1. Pin down the property’s location. The county or metro area of the home sets the limit. Where a home sits inside a metro area, the limit is generally set using the county with the highest median price in that metro. A buyer in a quieter county inside a pricey metro can therefore get the metro’s higher limit.

2. Count the units. Limits differ for one-, two-, three- and four-unit homes. FHA works for an owner-occupied home of one to four units, and the buyer must live in it as a principal residence.

3. Find the value to test. The lender uses the lesser of the purchase price or the appraised value. If you agree to a price above the appraisal, the loan shrinks to fit the appraisal.

4. Apply the leverage test. Maximum financing on a purchase is 96.5% of that value, with a 3.5% minimum investment, at a decision score of 580 or higher. The wholesale programs Lendmire works with start at 580. Seller or interested-party contributions can run up to 6% of the price.

5. Compare to the county cap. The final base loan is the lower of the leverage result and the county limit. At modest prices, leverage binds first. At very high prices, the county cap does.

6. Add the financed premium on top. The upfront premium is 1.75% of the base loan, and it can be financed. The financed amount is not tested against the county limit, so it can sit above it. The limit applies to the base loan.

7. Watch the appraisal. If the appraisal comes in under the price, the lesser-of rule cuts the loan, and the buyer covers the gap beyond the minimum investment. HUD’s reference guide for homeownership centers lays out how the shortfall works. In a fast-moving high-cost market, an appraisal gap is a common reason the cash-to-close number grows.

Where Does Your County Land Between Floor and Ceiling?

Most high-cost counties are neither at the floor nor at the ceiling. They sit in between.

Per HUD’s annual limits announcement, the agency must update the limits every year using a formula set in federal law. Three pieces matter:

• The floor is 65% of the national conforming limit.
• The area test: where 115% of the area’s median home price falls below the floor, the floor applies. Where it lands above, the area is a high-cost area, and the limit rises with local prices.
• The ceiling is capped by statute at 150% of the conforming limit.

So a county with a high median price gets a limit tied to that price, but only until it hits the ceiling. Two high-cost counties can carry different FHA limits because their medians differ. Only the most expensive reach the top.

To find your number, use HUD’s FHA mortgage limits lookup. Enter the state and county of the property, and pick the right unit count. Ask your loan officer to confirm the figure against the case number date, since that is what controls.

Where the General Rule Breaks

A few situations shift the answer, and these are the ones that surprise buyers.

Timing around January 1. The new limits attach to case numbers assigned on or after January 1, not to the closing date. A case number assigned in late December generally stays on the prior year’s limits. That is an inference from how the effective date is written, so confirm it with the lender if you are under contract near the rollover.

Metro versus county. Borrowers sometimes assume a neighboring county has a different limit when the metro rule gives both the same one. Check the metro, not just the county name.

Special-exception areas. Alaska, Hawaii, Guam and the U.S. Virgin Islands carry limits above the normal ceiling to reflect higher building costs. The HUD announcement above describes them, and the lookup tool shows the current figures.

Reverse mortgages. The reverse mortgage for older homeowners uses a single national maximum rather than county limits. It is a different product from the purchase loan discussed here.

Local-limit appeals. HUD has a process to request changes, but past guidance limits it to counties where the agency lacks home-sale data. A buyer should not plan around an appeal.

Occupancy. FHA requires you to live in the home. A non-occupant co-borrower is allowed, and in that case the limit and the leverage test both still apply. If a home is a second property or a rental, occupancy decides the leverage, and FHA is generally not the tool.

Refinances. County limits also cap the loan on refinances. The FHA Streamline refinances an existing FHA loan without an appraisal. The rate-and-term refinance can reach 97.75% on a home you have occupied for the previous twelve months, and the cash-out reaches 80% after twelve months of ownership and occupancy. For how the upfront premium trims a cash-out at the county limit, see Lendmire’s breakdown of the upfront premium on an FHA cash-out.

What Happens When the Price Is Over the Limit?

The loan can’t exceed the limit. The price can. The table shows the usual paths, from lowest to highest price relative to the county number.

Take a buyer whose contract price is slightly above what the county limit supports at 96.5%. The base loan stops at the cap. The buyer’s cash makes up the difference, on top of the 3.5% minimum investment. Add that to closing costs and the cash to close can climb past what the buyer planned.

When the gap gets large, other financing often fits better. The consumer protection bureau defines a jumbo loan as one above the maximum that Fannie Mae and Freddie Mac will buy. FHA and conventional limits are related but not the same. They share a ceiling in the most expensive areas, while the FHA floor is set lower.

What the Premium Adds in an Expensive County

FHA mortgage insurance is required on every FHA loan. That is a fixed part of the program, not an option you can decline with a bigger down payment.

There are two pieces. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and loan-to-value. On a thirty-year loan above 90% loan-to-value, the annual premium lasts for the term. At or below 90%, it ends after eleven years.

Here is the high-cost angle. Larger base loans generally fall into the higher annual premium tier, so a loan near the county cap tends to carry a heavier monthly insurance load than a smaller one. This is a program fact, not a price. Your Loan Estimate shows the actual figures for your file.

Qualifying ratios matter too, and bigger loans test them harder. The base pair is 31/43 (housing to total income) with no compensating factors. Documented compensating factors can stretch that toward 40/50 at the top tier, and the automated finding governs most files. In an expensive county, the ratio is often the tighter constraint, not the county cap.

FHA or Conventional at High Prices?

It depends on the file. The consumer protection bureau’s FHA guidance says FHA tends to cost more than conventional for borrowers with good credit and a 10% to 15% down payment. For lower credit scores or smaller down payments, FHA can often be a more affordable route. It recommends comparing quotes on total cost.

Here is the flip point. If you have strong credit and a larger down payment, conventional may cost less over time, and it has no required insurance for life of loan at high equity. If your score is in the 580s or 600s, or cash is tight, FHA may be the only low-down-payment path that works. Run both and compare the Loan Estimates side by side.

A Pre-Offer Checklist

1. Look up the county limit for the property’s location and unit count.

2. Confirm which year’s limit applies, based on when the case number will be assigned.

3. Estimate the loan at 96.5% of the lesser of price or likely appraisal.

4. Check that the base loan is at or under the cap.

5. Plan cash for the 3.5% minimum, any gap above the cap, and closing costs.

6. Get a Loan Estimate for FHA and for conventional, then compare total cost.

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. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend. You can reach the team at 828-256-2183.

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 Homeownership Center Reference Guide (archive)

2. HUD – FHA Announces Loan Limits

3. HUD FHA Mortgage Limits Lookup

4. CFPB – Mortgage Key Terms

5. CFPB – FHA Loans