FHA loan limits change from time to time and are based on the?

The correct choice reflects that FHA loan limits are primarily based on the median house prices in the area. The Federal Housing Administration (FHA) establishes these limits to accommodate varying housing market conditions across different regions. By using median house prices, the FHA can ensure that their limits are aligned with the local real estate market, thereby making FHA loans accessible to a broader range of borrowers.

This approach means that in areas where home prices are higher, the loan limits will be set accordingly, allowing buyers to finance homes that are reflective of the local market values. Conversely, in regions with lower home prices, the FHA loan limits will be lower.

In contrast to the other options, the average selling price of homes in a county may fluctuate significantly due to outliers or market changes but doesn't directly drive the FHA limits like median prices do. While factors such as FNMA maximum thresholds and average income levels are relevant in discussions surrounding mortgage lending and affordability, they do not dictate FHA loan limits specifically. The primary focus remains on the median housing prices, which are a key indicator for setting these loan limits.