Why Are Mortgage Loan Limits Rising In 2023?
Last Updated: January 10, 2023

Why Are Mortgage Loan Limits Rising In 2023?

Ready to buy a home and wondering how mortgage loan limits may impact your purchase? The good news for homebuyers is that 2023 conventional loan limits have increased to give you more buying power. Whether you are in search of a conventional, FHA, or VA loan, read on to learn about your current options and what you can expect as the year progresses.

First, What Are Mortgage Loan Limits?

New homebuyers may be surprised to find out that loan limits exist. However, they are standard in the industry. A loan limit refers to the highest amount that you can borrow for your mortgage.

These limits apply to Freddie Mac loans from the Federal Home Loan Mortgage Corporation (FHLMC) and Fannie Mae loans from the Federal Housing Finance Agency (FHFA).

The purpose behind conforming loan limits is to create a borrowing system that homeowners can actually pay back and prevent would-be homebuyers from borrowing more than they can afford.

While it may seem strange that non-government agencies essentially govern these limits, loans that are known to meet the criteria for Frannie Mae and Freddie Mac are known as “conforming loans.”

How Are Conforming Loans Different Than Conventional Loans?

Conventional loans can differ from the conforming Frannie Mae and Freddie Mac loans described above, however, the best way to think of the two loan types is that conforming loans are always conventional loans … while some conventional loans are not conforming loans. 

Conventional loans are defined as being issued by private, non-government entities … including banks. If those descriptions seem similar … they are. Conforming loans are a great choice for home buyers and borrowers with good to excellent credit scores, as they offer you the best and lowest interest rates.

Your loan officer will help you to determine whether your next loan is conforming, conventional or jumbo, and how the loan type may impact your loan limit, down payment, and interest rate. If your taste in homes is extravagant … or if you’re looking to buy in an area like Miami, Hawaii, or San Francisco, then you may meet the criteria for a jumbo loan over a conforming loan.

The median home price of the area you’re looking to buy in and how much you need to borrow will help to determine your best loan options.

Pro Tip: Remember, while your loan limit will encompass the amount you’ve borrowed and the accumulated interest, you will also make payments over time and your total borrowed loan amount will slowly reduce.

How Are Loan Limits Calculated?

In December of 2022, the Federal Housing Administration (FHA) announced their 2023 single family and home equity conversion loan mortgage loan limits for the Single Family Title II forward and Home Equity Conversion Mortgage or HECM insurance programs.

The FHA arrived at the 2023 loan limits by evaluating the appreciation of homes in the first six months of 2022. The National Housing Act (NHA) also requires that the FHA set Single Family forward loan limits at 115% of the median house price for each geographic area (typically a county). These limits are based on a specified floor and ceiling (as seen on the chart below).

Your Promise Home Loans mortgage officer can provide you with more information, here, as the calculation of these limits often initially confuses homeowners.

Size of Property/ Number of Units Loan Limit in Low Cost Area
Loan Limit in High-Cost Area “Ceiling” Loan Limit in Alaska, Hawaii, Guam,

and U.S. Virgin Islands “Ceiling” to account for construction costs

1-Unit $472,030 $1,089,300 $1,633,950
2-Units $604,400 $1,394,775 $2,092,150
3-Units $730,525 $1,685,850 $2,528,775
4-Units $907,900 $2,095,200 $3,142,800

Real-Time Examples of FHA Loan Limits

Next, let’s learn about the maximum and minimum national conforming loan limits for prospective properties in the United States. The maximum for 1 unit is $726,200 … while the minimum is currently holding at $472,030. Both the minimum and maximum are impacted by where you reside or want to buy a home.

For comparison: the loan limit for a homeowner in Hawaii would cap at $1,089,300 due to the increased costs for construction..

The FHA uses this exact guideline to set the mortgage loan limits (per county) for the national conforming loan limits established by the Federal Housing Finance Agency (FHFA) and the Federal Home Loan Mortgage Corporation … for any conforming loans guaranteed by Fannie Mae and Freddie Mac.

To explore the HUD calculator for your purchase to see how your loan will be impacted, go here.

You can also connect with a trained mortgage officer who can walk you through the process and find the best loan for your needs.

How Will These Changes Impact Your Mortgage Loan?

When you’re buying a home, everything from mortgage loan limits to your credit score and mortgage interest rate will make a difference. The recent increase in mortgage loan limits was welcome news to homeowners who were looking for properties with loans that came close to the 2022 loan limits.

While the increased loan limits are most likely not a make-it or break-it decision for most homebuyers, it can help you to secure a home in 2023. This will help those who may not have been able to purchase their home in 2022 or who held off due to rising interest rates.

FAQ’s About Mortgage Loan Limits

Homebuyers in search of a single family home that is based in a low-cost area (which includes many rural areas across the United States) will now qualify for a conventional loan limit in 2023 that is almost $80k more than the prior year 2022. Here are some other FAQs you should be aware of …

1. 2023 Maximum Claim Amounts

The HECM maximum claim account will increase from $970,800 in 2022 to $1,089,300 for FHA case numbers assigned on or beyond January 1, 2023.

Start looking at your options

Promise Home Loans is here to help.

2. Where Do The Maximum Claim Amount Apply?

This maximum claim amount will include all geographic areas across the United States, along with U.S. territories and special exception areas such as the U.S. Virgin Islands, Guam, Hawaii, and Alaska.

3. Why Do Loan Limits Vary?

Loan limits are higher in areas like Alaska, Hawaii, Guam, and the U.S. Virgin Islands as they require higher costs for construction and the median pricing for the region.

4. In What Areas Will Maximum Loan Limits for FHA Mortgages Increase?

In total the maximum loan limits for FHA mortgages will increase in more than 3200 counties, leaving only 12 counties where limits will remain unchanged.

5. What is the FHA Loan Limit for Low-Cost Areas?

The FHA loan limit for low-cost areas is set at 65% for the conforming loan limit.

6. What is the Increase for Low-Cost Single Family Homes From 2022 to 2023

The FHA limit is connected to the conforming loan limit, and FHA mortgages for 2023 can apply to single family homes that cost up to $472,030. That constitutes a $51,350 increase since 2022.

7. What is the Difference Between A Conforming Loan & A Conventional Loan

Conforming loans meet guidelines set by Freddie Mae and Fannie Mac, along with the Federal Housing Finance Agency (FHFA) while conventional loans are through banks and non-government entities.

8. What Are The Rules for Mortgage Insurance?

If you do decide on a FHA loan, you will be required to have mortgage insurance and an upfront payment. These sums can add up on a large loan. Other options include conventional loans which waive mortgage insurance upon reaching 20% equity in your property.

9. What if you want an FHA or VA Loan?

If you’re interested in an FHA or VA Loan, call (888) 762-7808 or prequalify online: https://promisehomeloans.com


If you’re wondering if now is a good time to buy, the answer is yes! Rising mortgage loan limits of more than 10% for conventional loans can lead to more buying power and a better chance at securing your dream home.

While loan limits rising across the country give you more purchase ability, it’s also important to connect with a mortgage officer who can get you the best interest rate on your loan. Qualify to get approved for a home loan in minutes online at www.promisehomeloans.com or call (888) 762-7808.

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