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Seattle FHA Loan Limits 2016, and Why They Might Rise in 2017

At a glance: The 2016 FHA loan limit for Seattle is $540,500, for a single-family home. But the median home price in the area has risen well above that. So there’s a chance we will see higher limits in 2017.

Do you plan to use an FHA-insured mortgage loan buy a home in Seattle in 2016? If so, there’s an important number you need to know. It’s $540,500. That’s the 2016 FHA loan limit for Seattle, for a single-family home.

The median home value for the area, on the other hand, is now higher than $540,500. Much higher, in fact. So we could see higher loan limits in 2017, due to rapid appreciation.

2016 FHA Loan Limits for Seattle Metro Area

The FHA loan program is managed by the Federal Housing Administration, which falls under the Department of Housing and Urban Development (HUD). HUD limits the size of the mortgage loans they are willing to insure, which in turn affects all borrowers who use the program.

2016 FHA loan limits for the Seattle metro area:

  • One-family home: $540,500
  • Two-family home: $691,950
  • Three-family home: $836,400
  • Four-family home: $1,039,450

FHA limits vary by county, and they’re generally the same across metro areas. That’s why King, Pierce and Snohomish counties all have the same FHA loan limit — they’re all part of the Seattle metropolitan area.

According to HUD: “For counties, or equivalent, located in Metropolitan Statistical Areas (MSAs) the limit for all areas in the MSA is calculated based on the highest cost county.”

The question is, how do these caps compare to home prices in the Seattle real estate market? Here’s a look at recent home-price trends in the area, and how they relate to the FHA loan limits stated above.

Median Home Price in Seattle Now Exceeds Loan Caps

The median price for a single-family home in Seattle rose to $625,000 in August 2016, according to data released by the Northwest Multiple Listing Service last week. That’s an increase of 8.7% over the same time last year, and a gain 79% over the last five years.

You’ll also notice that figure is significantly higher than the single-family FHA loan limit for the metro area.

At the end of 2015, HUD increased loan limits for the Seattle area to keep up with rising home costs. They raised the cap for a single-family home from $517,500 (in 2015) to $540,500 (in 2016), an increase of $23,000. And there’s a chance they’ll raise them again next year.

Why Higher Limits Are Possible in 2017

Each year, the Federal Housing Administration recalculates its loan limits for all counties in the U.S. According to the HUD website, their formula is based on 115% of the median house price in each area. So when median home values rise significantly, FHA tends to increase loan limits to keep pace.

Home prices across the Seattle metro area are still rising, and this upward trend could continue throughout 2017 as well. As a result, HUD might increase the Seattle FHA loan limits for 2017, as they did for 2016.

We’ll find out in December. That’s when they’ll announce the revised (or unchanged) limits for next year.

Need a loan? Sammamish Mortgage has been serving home buyers in the Seattle area, and across the Pacific Northwest, for more than 20 years. We offer a variety of loan products and programs, including FHA. If you’re shopping for an FHA loan in the Seattle area, please contact us today. We can help you explore your options and make an informed decision.

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