An FHA loan just became more powerful.

The Federal Housing Administration recently announced an increase to the maximum loan limits that will go into effect in 2021.

Recent gains to annual home prices triggered an increase to the new FHA limits, which have a ceiling of $822,374 up from $765,000.

The new ceiling applies to high-cost areas where the median home price greatly exceeds the federal agency’s floor limits. This affects about 65 counties with high buyer demand. The increased limits to the FHA loan program will also apply to 3,000 other counties nationally.

An FHA loan creates a wider pathway toward homeownership through lenient borrowing terms.

Low- to moderate-income earners with modest credit scores qualify for an FHA loan. The more lenient terms are possible because FHA loans are insured by the federal government. There’s even wiggle room on the down payment requirement.

FHA-approved borrowers will not have to pay a standard amount for a down payment, saving them thousands of dollars that could have taken some time to save up for. That’s another reason FHA loans are popular among first-time homebuyers.

Borrowers can apply for this type of loan with any FHA-approved lender. FHA loans are backed by Fannie Mae and Freddie Mac, which work with lenders to administer the loan program.

Generally, the loan limits have increased over the last several years at a consistent rate. Next year, only about 125 counties will see no increase to the borrowing limit for an FHA loan.