FHA Loan Affordability: How Much House Do You Qualify For?

Homebuyers are drawn to the FHA loan program because of its lenient qualification requirements compared to conventional mortgage alternatives. But do these relaxed standards mean that FHA lenders will let you borrow more money and purchase a more expensive home?

In some cases, yes, thanks to higher debt-to-income allowances, although there’s a long list of other items that impact the size of the loan you're eligible for.

Key Takeaways

• FHA loans are a practical option for borrowers with lower credit scores who don’t qualify for or are quoted higher rates with other types of mortgages.

• All FHA mortgages have maximum loan limits, which vary by locale. The limit for a single-family home within the continental United States ranges from $498,257 to $1,149,825.

• Having a higher income usually translates into more purchasing power. However, other existing debts may reduce the loan size you qualify for.

• Related costs such as homeowners insurance and property taxes will also impact your mortgage size.

FHA Loan Affordability Calculations

It’s not uncommon for potential borrowers to wonder, “how much FHA loan do I qualify for?” To give you an idea,the following table shows what home price a buyer might qualify for with an FHA loan based on various income levels.

For more personalized results, see our FHA Loan Calculator or speak with a lender.

*Calculations assume a 30-year fixed-rate FHA loan, 3.5% down payment, 5.963% rate (30-day avg. from OBBMI), annual property taxes equal to 1.2% of the home's value, homeowners insurance of 0.35%, no HOA, housing and total DTI maximums of 36% and 45%. Assumes the upfront mortgage insurance premium is wrapped into the loan. Qualifying credit score required and approval not guaranteed. Check with a lender for your maximum home price.

Elements of FHA Loan Affordability Calculations

So, what all affects FHA loan affordability? Here are some of the different elements lenders consider when qualifying you for a mortgage.

FHA Loan Limits

No matter how well-qualified you are, loan limits are attached to all FHA mortgages. This maximum limit is adjusted annually to be 65% of the conforming loan limits set by the Federal Housing Finance Agency.

For most locales, the 2024 FHA loan limit for a single-unit property is $498,257. Keep in mind that this is just the loan limit, not the total amount of home you can purchase using an FHA mortgage.

You can look up your area’s loan limits on the HUD website.

Increased Loan Limits for High-Cost Areas

Certain housing markets designated as high-cost areas have higher FHA loan limits. You will still need the income level to support a larger loan, but it may be possible to borrow as much as $1,149,825 for a single-unit property.

Many communities have increased FHA loan limits above the standard limits but less than the high-cost maximum. Here are some examples of mid-range limits that you may find for single-family homes in different parts of the country.

• Phoenix, AZ – $530,150

• Charleston, SC – $586,500

• Fairfield, CT – $718,750

• Hood River, OR – $724,500

• Key West, FL – $929,200

The FHA has also designated Alaska, Hawaii, Guam, and the US Virgin Islands as "special exception areas" with even higher loan limits.

Income

Mortgage companies use your monthly qualifying income as one of the core factors in determining the size of the loan payment you can afford.

Lenders run your scenario through a computerized approval system, which establishes how much income you can allocate toward debt payments. This is called the front-end debt-to-income (DTI) ratio or housing ratio.

For Example: If you earn $6,000 per month and the lender you’re working with has a maximum housing ratio of 40%, the largest monthly payment you could qualify for including taxes, insurance, and HOA dues would be $2,400.

With the same $6,000 monthly income and a lender using a 45% front-end DTI, you could potentially qualify for a $2,700 payment.

Existing Debt

Lenders also consider other existing monthly debt payments for things like auto loans, student loans, and minimum credit card payments. These monthly obligations are combined with your prospective mortgage payments and factored into the back-end debt-to-income ratio, also referred to as the total DTI.

For Example: You earn $6,000 per month and you qualify for a 45% front-end DTI and 55% total DTI. Your housing expense could be $2,700. Your monthly debt payments – like auto loans and credit card minimums – could be up to $600.

What if your existing debts are higher? In this scenario, if you had $1,000 in debt payments, the largest housing payment you could qualify for would be $2,300. Basically, non-mortgage debt payments eat into your maximum housing payment.

Qualifying for an FHA loan with a back-end DTI as high as 56.9% is difficult but possible, although you typically must have good credit or cash reserves.

Down Payment

The larger your down payment, the more home you can buy. Lenders determine the maximum loan size you qualify for, not how much house you can buy. A larger down payment would typically transfer dollar-for-dollar into a more expensive home.

For Example: Say a lender qualified you to purchase a $300,000 home based on the standard 3.5% down payment of $10,500. If you received down payment assistance and have a total of $30,500 available, you could potentially purchase a $320,000 property.

A larger down payment could also raise the DTI lenders are willing to accept on your loan, expanding your purchasing power even further.

Credit Score

Although the FHA may have a lower credit score requirement than other mortgage programs, your rating will still impact loan affordability. This is primarily because of higher interest rates for borrowers with lower credit. However, having an excellent score could also cause lenders to allow a higher DTI ratio.

Interest Rate

The interest rate you qualify for is one of the main factors of loan affordability. The larger financial markets determine overall rates, but your credit score and other characteristics of your loan application can affect the final rates you're quoted.

Choice of Lender

Not all FHA lenders are going to give you the same interest rate. You may receive better rates – and, in turn, the potential to get approved for a larger loan – from certain mortgage companies instead of others.

Plus, different lenders can use different ratios to calculate FHA loan affordability. Some may allow a DTI as high as 55%, while others could limit loans at 43%.

Apply with at least three different lenders to maximize your chances of receiving the best possible loan offer.

Property Taxes

Property taxes are paid as part of your mortgage with all FHA loans, and lenders consider the tax burden when determining how large of a mortgage you qualify for.

The cost of property taxes can vary greatly from one area to the next. Even two nearby communities could have drastically different tax rates.

According to analytics firm ATTOM, the average effective property tax rate across the US was 0.87% in 2023. However, the highest-cost county (Summit County, OH) had an average rate of 3.17%. At the same time, the lowest (Brunswick County, NC) paid just 0.13%.

Homeowners Insurance

Homeowners insurance is also included in your FHA mortgage payment and gets counted as part of your housing expenses for loan affordability purposes.

Like property taxes, homeowners insurance costs can depend greatly on your home's location. The national average is $2,377 annually, with some areas costing less and others much more. For example, the annual average in Vermont is just $918, while residents in Florida pay an average of $10,996.

HOA Fees

If your home is in a homeowners association, you'll likely be responsible for HOA fees, which lenders also consider when calculating your maximum loan amount. While this may only have a modest impact in most cases, homes with high dues – such as condos or properties within luxury communities – could drastically lower your purchasing power.

Qualifying for FHA Loans

Qualifying for FHA loans can be simpler than other types of mortgages – especially for borrowers with lower credit scores or higher levels of debt. However, there are still minimum requirements you'll have to meet.

• You need a minimum credit score of 580 for a 3.5% down FHA mortgage. Some lenders may accept borrowers with scores as low as 500 with a 10% down payment.

• Lenders each have their own maximum acceptable DTI, but the FHA puts a hard limit at 56.9%. If your total DTI is 57% or higher, you will not be eligible for an FHA-backed loan.

• You must plan to use the home you’re purchasing as your primary residence. You cannot take out an FHA mortgage on a second/vacation home or investment property.

• You can purchase properties with up to four individual units so long as you reside in one as your primary residence.

• The home will need to be appraised and meet the FHA’s minimum property standards.

• You will generally need two years of filed tax returns showing stable and predictable income. Self-employed borrowers may face other requirements.

How Much FHA Loan Do I Qualify For?

To find out precisely how large of a loan you qualify for, check out today’s FHA mortgage rates and apply with a reputable lender who can examine your situation and determine your true homebuying power.

You can also use our FHA loan calculator to estimate your monthly payments on an FHA mortgage with taxes and insurance included.