Skip to main content
Advertiser Disclosure
We do receive compensation from some partners whose offers appear on this page. We have not reviewed all available products or offers. Compensation may impact the order in which offers appear on page, but our editorial opinions and ratings are not influenced by compensation.

Ascent-logo

  • Credit Cards
  • Banking
  • Brokerages
  • Loans
  • Mortgages
  • Knowledge
  • Latest Picks
  • Search Icon Click here to search

Credit Cards

Top Picks
  • Best of March 2021
  • Cash Back
  • Balance Transfer
  • Travel
  • 0% APR
  • Rewards
  • Bad Credit
Knowledge
  • Beginners Guide to Credit Cards
  • How to Rebuild Your Credit
  • Maximize Your Credit Card Rewards
  • Learn More About Credit Cards
Credit Card Tools
  • Compare Cards
Looking for a new credit card?

Explore the best credit cards in every category as of March 2021.

Get started!

Banking

Top Picks
  • Best Savings Accounts
  • Best Bank Accounts
  • Best Money Market Accounts
  • Best CDs
  • Best Checking Account Bonuses
Knowledge
  • Beginners Guide to Banking
  • Everything You Need to Know About Savings
  • Money Market Accounts Made Easy
  • Learn More About Banking
Looking for a place to park your cash?

Check out our top picks of the best online savings accounts for March 2021.

Get Started!

Brokerages

Top Picks
  • Best Brokers of March 2021
  • Best Online Brokers for Beginners
  • Best Options Brokers
  • Best IRA Accounts
  • Best Roth IRA Accounts
  • Best Robo Advisors
Knowledge
  • How to Open a Brokerage Account
  • Beginner's Guide to Brokerages
  • Learn More About Brokerage
Just getting started?

Explore our picks of the best brokerage accounts for beginners for March 2021.

Get Started!

Loans

Top Picks
  • Best Loans of March 2021
  • Best Personal Loans for Bad Credit
  • Best Loans for Debt Consolidation
  • Best Low-Interest Personal Loans
  • Best Personal Loans for Good Credit
  • Best Personal Loans for Fair Credit
Knowledge
  • Personal Loans Made Easy
  • Debt Consolidation Guide
  • How to Pay Off Debt
  • Learn More About Loans
Thinking about taking out a loan?

Before you apply for a personal loan, here's what you need to know.

Get Started!

Mortgages

Top Picks
  • Best Mortgage Lenders of March 2021
  • Best Mortgage Lenders for Poor Credit
  • Best Refinance Lenders
  • Best VA Mortgage Lenders
Knowledge
  • First Time Homebuyers Guide
  • Home Loans Made Easy
  • The Complete Guide to Refinancing
  • How to Get a Mortgage with Bad Credit
  • Learn More About Mortgages
Tools & Calculators
  • Mortgage Calculator
Compare Rates
  • Today's Mortgage Rates
  • Refinance Rates
  • 15-Year Mortgage Rates
  • 20-Year Mortgage Rates
  • 30-Year Mortgage Rates
  • Jumbo Mortgage Rates
  • VA Loan Rates
  • 5/1 ARM Rates
  • 7/1 ARM Rates
  • FHA Mortgage Rates

Knowledge

Knowledge Section
  • All Articles
  • Credit Card Articles
  • Banking Articles
  • Brokerage Articles
  • Personal Loan Articles
  • Mortgage Articles
  • Personal Finance Articles
Recent Articles
  • Why You Shouldn't Max Out Your Budget When Buying a Home

    Mortgages

    Why You Shouldn't Max Out Your Budget When Buying a Home
  • Want to Lower Your Housing Costs? Downsizing Isn't Always the Answer

    Mortgages

    Want to Lower Your Housing Costs? Downsizing Isn't Always the Answer
  • This Is the Median U.S. Home Value. Can You Afford It?

    Mortgages

    This Is the Median U.S. Home Value. Can You Afford It?
  • Owning a Home Is More Affordable Than Renting in Most Markets, Data Shows

    Mortgages

    Owning a Home Is More Affordable Than Renting in Most Markets, Data Shows
  • The Ascent
  • Knowledge
  • Mortgages

FHA Loan Limits Rise: Here's What You Need to Know

by Maurie Backman | Jan. 26, 2021

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

a keyboard with a key marked "loan."

Image source: Getty Images

FHA borrowers now have more options when it comes to more expensive homes.

If you're looking to buy a home but don't have a lot of money to put toward a down payment, you might consider an FHA loan. These government-backed loans allow you to put as little as 3.5% down on a home purchase, and they have lower credit score requirements, too. With a conventional mortgage, you'll generally need a score of at least 620 to get approved, whereas FHA lenders will usually accept a score of 580.

That said, there are limits on how much you can borrow with an FHA loan. But this year, those limits are rising. Here's what you need to know.

New FHA loan limits

With home values skyrocketing on a national level, you may need a higher mortgage than ever to buy. The good news is that FHA loan limits are increasing this year. In 2020, the limit for FHA loans was $331,760, but this year, that figure jumped to $356,362.

That said, in some parts of the country, where home prices are notably expensive, FHA loan limits will rise to $822,375, up from $765,600 in 2020. And in Alaska, Hawaii, Guam, and the U.S. Virgin Islands -- areas known for much higher construction costs and home prices -- this year's FHA limit will sit at $1,233,550 (up from $1,148,400 in 2020).

Get $150 off closing costs with Better.com Mortgage

Get $150 off closing costs with Better.com Mortgage

This is one of the top lenders we've used personally to secure big savings. No commissions, no origination fee, low rates. Get a loan estimate instantly and $150 off closing costs.

Learn More

Should you get an FHA loan?

An FHA loan can be a good option if your credit score needs work or you haven't saved much for a down payment. But there's a drawback to getting an FHA loan, and it's having to pay mortgage insurance premiums. First, you'll pay a one-time premium of 1.75% of your home loan's value. If you're taking out a $500,000 mortgage, that's an extra $8,750 you'll need to cough up. That said, you won't necessarily have to write out a check for that initial premium at closing. Rather, you'll generally have the option to roll it into your loan and pay it off over time.

You'll then be liable for annual mortgage insurance premiums that range from 0.45% to 1.05% of your loan amount. If you make less than a 10% down payment on your home and take out an FHA loan, you'll never get to cancel those mortgage insurance premiums. This differs from private mortgage insurance on a conventional loan, which you'll have to pay if you fail to put 20% down -- it can go away once you have 20% equity in your home.

Before you decide to apply for an FHA loan, it could pay to see if you qualify for a conventional mortgage. This is especially true if your credit score is in decent shape. But if you're really limited on funds for a down payment, an FHA loan may be your best (and only) choice. And to be clear, it's not a bad choice. Just be aware of the extra costs you'll incur, and shop around with multiple FHA lenders before accepting an offer. You never know if one lender will give you a more competitive interest rate than another, so having options helps.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase. 

Our expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See our full advertiser disclosure here.

About the Author

Maurie Backman
Maurie Backman icon-button-linkedin-2x

Maurie Backman is a personal finance writer who covers everything from savings to retirement to healthcare. Her articles have appeared broadly on major outlets such as CNBC, MSN, and Yahoo.

Share This Page
Facebook Icon This icon shares the page you are on via Facebook
Blue Twitter Icon Share this website with Twitter
LinkedIn Icon This image links to share the page over LinkedIn.
Email Icon Share this website with email

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

Related Articles

"Rates" on a stick note on a house image for Find the Best Mortgage Rates

Find the Best Mortgage Rates

Cardboard cutout house on a desk image for Best Mortgage Lenders for 2021

Best Mortgage Lenders for 2021

Money bags and a model house sit on a balance beam image for Best Mortgage Refinance Lenders for 2021

Best Mortgage Refinance Lenders for 2021

Change on a desk image for Mortgage Payment Calculator

Mortgage Payment Calculator

Featured Articles

Find the Best Mortgage Rates

Best Mortgage Lenders for 2021

Best Mortgage Refinance Lenders for 2021

Mortgage Payment Calculator


The Ascent Logo

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

btn_facebook-yellow btn_twitter-yellow btn_instagram-yellow

Copyright © 2018 - 2021 The Ascent. All rights reserved.

About The Ascent
About Us Contact Us Newsroom How We Make Money Editorial Integrity Ratings Methodology
Legal
Terms of Use Privacy Policy Accessibility Policy Terms and Conditions Copyright, Trademark and Patent Information
Learn
Credit Cards Banking Brokerage Loans Recent Articles

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Back to The Motley Fool