How FHA & Conforming Loan Limits Work

If you have ever wondered why the same loan program lets a buyer in one county borrow far more than a buyer in another, the answer is loan limits. They are a foundational rule of American mortgage financing, and for small multifamily investors they can decide which properties are financeable at all.

Conforming loan limits

A conforming loan is one that meets the standards set by the Federal Housing Finance Agency (FHFA) to be purchased by Fannie Mae or Freddie Mac. One of those standards is a maximum loan amount, the conforming loan limit, which the FHFA republishes every year based on changes in national home prices.

There is a baseline limit that applies to most of the country, and a higher ceiling for designated high-cost areas, set at 150% of the baseline. Counties where homes are especially expensive get the higher limit; most counties use the baseline.

FHA loan limits

FHA loans, insured by the Federal Housing Administration, have their own limits that are tied to the conforming figures. The FHA sets a "floor" for lower-cost areas and a "ceiling" for high-cost areas:

• The FHA floor is 65% of the conforming baseline limit and applies in most of the country.
• The FHA ceiling is 150% of the conforming baseline limit and applies in the most expensive counties.

Between the floor and the ceiling, individual counties are assigned limits based on local median home prices, which is why FHA limits vary so much across the map.

The part investors miss: unit count

This is the most important detail for small multifamily buyers. Loan limits are published separately for one, two, three and four-unit properties, and the limits step up meaningfully with each added unit. A duplex has a higher limit than a single-family home, a triplex higher still, and a fourplex the highest of the four.

That matters because a two-to-four unit property can often be financed with the same owner-occupied programs as a house, at those higher limits, if you live in one of the units. It is one of the most powerful entry points into multifamily investing, and it exists entirely because of how unit-count loan limits are structured.

How to find the limit for a county

Because the figures update annually and vary by county and unit count, always confirm the current numbers from the official source: the FHFA publishes conforming limits and HUD publishes FHA limits each year, searchable by county. Once you know the limit for a property's county and unit count, you know the largest loan these programs will support there.

From there, the question becomes whether the deal cash flows at that loan amount. Use the mortgage calculator to see the payment, and the rental property calculator to check cash flow, cap rate and cash-on-cash return.

Frequently asked questions