2024 FHA Loan Limits in California | LendingTree (2024)

What is an FHA Loan? Requirements, How to Get One and Best Lenders

California residents with lower credit scores or limited down payment savings can still purchase property with the help of an FHA loan. These mortgages, backed by the Federal Housing Administration, limit how much you can borrow depending on where you live. For many single-family homebuyers in California, the FHA loan limit is $498,257, but in more expensive areas like Los Angeles, Orange, Santa Cruz and San Francisco counties, you could borrow as much as $1,149,825.

How are FHA loan limits determined?

The amount you can borrow using an FHA loan changes each year to reflect shifts in home prices across the country. The FHA sets its financing cap as a percentage of the national conforming loan limit established by the Federal Housing Finance Agency for conventional loans or mortgages that follow a list of rules created by Fannie Mae and Freddie Mac.

In 2024, the largest FHA loan someone can get for a single-family home in most parts of the country is $498,257, or 65% of the national conforming loan limit of $766,550. This amount is known as the loan limit “floor.” However, those living in more expensive areas can finance even more, potentially borrowing up to the loan limit “ceiling” amount of $1,149,825, or 150% of the national conforming loan limit.

Only buyers in Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Clara and Santa Cruz counties can access that top loan amount in California though. Residents living in 27 other counties across the state, including Butte, Fresno and Yuba, can borrow only up to $498,257, while the remaining 21 counties have a limit that falls somewhere between that loan limit floor and ceiling.

Since FHA loans are backed by the government, meaning a lender will be reimbursed if you default on your payments, they have certain qualification requirements that need to be met in order to qualify:

→ Credit score of at least 500. If your credit score is this low, you must put down 10% or more when buying the home. Those with scores of 580 or higher only need a 3.5% down payment.

→ 3.5% down payment. You can finance all but 3.5% of the home’s purchase with an FHA loan provided your credit score tops 580. Buyers with lower scores have to make at least a 10% down payment.

→ Debt-to-income ratio of 43% or less. Before approving you for a new loan, lenders calculate how much of your income goes toward debt repayment by dividing your total debt by your earnings. The higher your DTI ratio, the more lenders fear you’ll be unable to handle your repayment obligations and could default. So, the FHA prefers borrowers with a ratio of 43% of less. You may still qualify with a larger debt-to-income ratio if you have a strong credit score or large cash reserves.

→ FHA mortgage insurance coverage. You must purchase two kinds of mortgage insurance to get an FHA loan. The upfront mortgage insurance premium costs 1.75% of the total loan amount and is usually added on to your outstanding mortgage balance. The annual mortgage insurance premium runs between 0.15% and 0.75% of the total loan amount and is commonly factored into your monthly mortgage payment.

→ Get an FHA appraisal. The FHA requires that any home purchased with one of its loans pass a $400-$700 FHA appraisal to confirm the value, condition and safety of the property.

→ Used for primary home purchase. FHA loans cannot be used to buy vacation homes or rental properties, only primary residences. You must also live in the home you purchase for at least one year.

→ Solid job history. There are no income limits or requirements with FHA loans, but lenders will want to see a steady employment history so expect to provide two years’ worth of pay stubs and W-2s, as well as employer contact information. Be prepared to explain any resume gaps as well.

Buying a multifamily property with an FHA loan

FHA loans can be used to buy multifamily homes with up to four separate housing units as long as you plan to live in one of those units. You still only need a 3.5% down payment to secure the loan and most of the requirements to qualify are the same as for a single-unit home, although higher loan limits apply. To get a multiunit FHA loan, you will need to meet the following requirements:

→ Credit score of at least 500. If your credit score is between 500 and 579, you can still get an FHA loan but you must make a 10% minimum down payment. Those with higher scores can put down just 3.5%.

→ 3.5% down payment. Those with credit scores of 580 or better can secure the loan with as little as a 3.5% down payment.

→ Stable income. Lenders usually want to see proof of at least two years’ worth of steady income and employment history, but you can include your potential future rental earnings in your application as well.

→ Debt-to-income ratio of 43% or less. Ideally, your total debt obligations should total less than 43% of your earnings.

→ Reside in one of the units. You can’t rent out all the units in your multifamily home. FHA loans require that at least one unit in the property be your primary residence for at least a year.

→ FHA mortgage insurance. All FHA loans require an upfront mortgage insurance premium equal to 1.75% of the total loan amount and an annual mortgage insurance premium of between 0.15% and 0.75% of the loan amount.

→ Get an FHA appraisal. You must purchase a $400 to $700 FHA appraisal of the home to verify its value and condition before the loan can be approved.

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