Countless people will begin buying properties in 2016. If you’re planning to buy a house in 2016, your order of business includes mortgage pre approval, earning downpayment, and looking for a lender. But aside from the mortgage and the property, you must also know the loan limits set. Every state has set limits when it comes to mortgage depending on their current market.

In getting FHA loan, authorities released the 2016 loan limits according to property type and states where rates will be applied.

Understanding FHA Loan

FHA loan is a loan type that allows people to buy a house through Federal Housing Authority-backed mortgage. The loan itself is quite beneficial for buyers. As a government-backed loan, FHA loan providers are easy to find. Lenders are not adamant in providing this loan since it’s government-insured. Lenders won’t have any problems in case buyers defaulted on their payments.

Aside from higher chances of approval, FHA loan also requires lower downpayment. With 3.5 percent downpayment, a buyer will have the chance to own a house.

FHA Loan Limits

One of the vital information to check about FHA loan is the limits. Different property types come with varying limits. The property’s location also has its specific limits. Newly released limits are the following.

Standard Loan Limits

Standard loan limits refer to the basic limits set per state and per property type. This standard limit is around 65 percent of conforming limit of $417,000 for typical properties. For people purchasing properties going beyond this limit will need to get a different loan type to make it possible.

Standard FHA limits for 1-unit houses is set at $271,050 while a 4-unit home’s limit reaches up to $521,250. You will find these limits in areas like Indianapolis, Indiana; Knoxville, Tennessee; and others. These areas have median property prices that result to $271,050 or lower after multiplying it by 1.15 percent.

Mid-Range Limits

Some areas have higher limits and the properties offered in these places are said to have higher prices than $271,050 after median real estate prices are multiplied by 1.15 percent. A mid-ranged one-unit home costs $271,050 up to $625,500. A two-unit home costs around $347,000 to $800,775. On the other hand, a 3-unit and 4-unit home cost between $419,425 and $967,950 and $521,250 and $1,202,925, respectively.

If you’re targeting to buy properties in Minneapolis/St. Paul, Minnesota; Cincinnati, Ohio; and Boston, Massachusetts, expect these mid-range loan limits. FHA mortgage lenders comply with these limits in approving mortgage applications.

High-Cost Limits

The limits set in this bracket are considered the ceiling limit in terms of insured loan size. Just like in computing standard and mid-range limits, the median property value and 1.15 percent are multiplied together and the result is the limit. In this bracket, the lowest limit is $625,500 for one-unit homes and $1,202,925 for four-unit homes.

Places with these limits include New York City metropolis, Potomac, Maryland, San Jose, California, and suburbs in other states.

Special Exceptions

Some areas in the country have way higher property value. This is due to expensive construction costs in the territory. Since property values are expensive due to construction costs, the amount multiplied by 1.15 percent will be a lot higher than the aforementioned limits. A one-unit property will have a limit of $938,250 while a four-unit property comes with a limit of $1,804,375. Areas with these limits are US Virgin Islands, Hawaii, Guam, and Alaska.

Streamline Refinance Limits

Aside from buying a house, FHA also offers refinance services through FHA Streamline Refinance. This refinance scheme has more relaxed requirements as it only has three eligibility requirements. A person taking advantage of this refinance should always be updated on his payments, the mortgage should be at least six months old, and proven benefit after refinancing.

Just like regular mortgage, refinance also has loan limits of $729,750. It’s crucial to check with lenders to get assistance in refinancing your FHA mortgage or see if you can refinance according to your financial status.

Loan limits should be checked together with US mortgage rates to know the amount you can borrow, particularly in using FHA loan. Countless lenders offer FHA loan due to its benefits and it’s considered a great option for borrowers who want to save money. Consult with your lender to find out more about these limits and current mortgage rates.