Each year, the government-backed mortgages have different loan limits. Understanding these limits can help you determine how much you may be eligible to borrow whether to purchase or refinance your home.
This year, loan limits jumped just short of 7%, similar to last year’s increase. This is due to the increasing home values, which constitute higher loan limits to make it feasible for borrowers. Keep reading to learn the loan limits for each loan program.
The loan limits for FHA loans increased in 3,000 counties for 2019. The new FHA floor loan limit is $314,827; this is an increase from the previous floor of $294,515. The ceiling for high-cost counties also increased to $726,525 from $679,650.
These increases signify 65% of the new conforming loan limit of $484,350 for the floor and 150% of $484,350 for the ceiling. The FHA sets limits in each county based on the average home value. Typically, the county-specific limit is 115% of the average home price for the area, but it will fall somewhere between $314,827 and $726,525.
Just like the conforming loan limit, VA loan limits increased to $484,350. The exception to this rule is the 199 counties the VA considers ‘high cost’ and has higher limits. This year there are 21 fewer high-cost counties than last year and no counties were added to the high-cost list.
VA loans are a little different, though. Even though they have a maximum loan amount set, you can still borrow more. The maximum is the most that the VA will guarantee for you. If you need to borrow more and you aren’t buying property in a high-cost county, you may need to make a down payment on the difference between the loan limit and the mortgage you need.
USDA loans operate a little differently. In order to qualify for a USDA loan, your total household income must not exceed the USDA limits. These limits did increase for 2019, which may allow more families to qualify for USDA financing. The average income limits increased to $82,700 for families with 1 – 4 members and $109,150 for families with 5 or more household members. Some high-cost counties also have higher income limits.
Because the USDA has income limits, they don’t necessarily have loan limits. Instead, they focus on your debt ratio as it compares to your income. Your total housing debt shouldn’t exceed 29% – 30% of your gross monthly income. Your total debt ratio, which includes all of your monthly debts, shouldn’t exceed 41% of your gross monthly income.
Keep in mind that your eligibility income and qualifying income differ. Your eligibility income is your total household income. This includes every adult household member regardless if they are on the mortgage. The USDA does provide allowances to help you qualify, though. If you have children, disabled relatives, or elderly relatives in your household, you receive allowances as follows:
- $480 for each child under the age of 18 living with you
- $480 for each child over the age of 18 living with you that is a full-time student
- $480 for each disabled relative living with you
- $400 for each elderly relative living with you
You deduct your applicable allowances right from your total household income to determine your eligibility. Your qualifying income, however, is the income from only those borrowers listed on the mortgage. Your qualifying income may be lower than your eligibility income, so keep that in mind as you determine your debt ratios.
2019 will see increases throughout all loan programs, making it easier for you to get the loan that you need. As always, make sure you maximize your qualifying factors, including your credit score, qualifying income, and debt ratios before you apply for a mortgage.Click to See the Latest Mortgage Rates»