HUD announces new permanent FHA mortgage loan limits: New limits range from $271,050 to $625,500 MortgagePress.comHUD, FHA, loan limits, Housing and Economic Recovery Act of 2008, Stimulus Package
U.S. Department of Housing and Urban Development Secretary Steve
Preston has announced the new Federal Housing Administration (FHA)
mortgage loan limits for single-family homes as prescribed by the
Housing and Economic Recovery Act of 2008.
Beginning Jan. 1, 2009, FHA will insure single-family home
mortgages up to $271,050 in low cost areas and up to a maximum of
$625,500 in high cost areas. The February 2008 Stimulus Package
temporarily raised the FHA maximum to $729,750 through December 31,
2008. The new $625,500 maximum, however, represents a significant
increase over the $362,790 limit that was in effect prior to the
Stimulus Package.
"In today's environment where access to credit is being
restricted, we need to make mortgage loans readily available to
households throughout the country, and especially in high-cost
areas," said Preston. "These new loan limits will ensure FHA can to
continue help struggling homeowners refinance into safe, affordable
government-insured loans, and allow many first-time buyers take
advantage of today's buyers market."
For several years, FHA's loan levels were below the cost of the
average home in communities across the nation. As a result,
families who needed FHA mortgage insurance to qualify to buy a home
were effectively locked out of the process. In some cases,
borrowers turned to exotic subprime loans.
FHA mortgage insurance makes home financing more available to
low-income and first time homebuyers. This is because the mortgage
is backed by the full faith and credit of the government, freeing
lenders from assuming the risk of default.
Higher FHA loan limits do not cost the government any money
because the FHA Insurance Fund is fully supported by premiums paid
by borrowers who receive FHA-insured mortgage loans.
The Housing and Economic Recovery Act pegs the national
conforming mortgage loan limit to a house price index chosen by the
new Federal Housing Finance Agency (FHFA). For 2009, the national
conforming limit will remain at the current level of $417,000.
The Act says that the new FHA loan limits will be set at 115
percent of the median house price in a given area, as determined by
HUD, but can not be lower than 65 percent of the conforming loan
limit (the national floor). Also, the FHA mortgage limit cannot
exceed 150 percent of the national conforming loan limit (the
national ceiling).
Home Equity Conversion Mortgages
The Act also pegs the national mortgage limit for FHA-insured
reverse mortgages to the national conforming loan limit. The FHA
product known as the Home Equity Conversion Mortgage (HECM) will
therefore have a national mortgage limit of $417,000. Unlike the
new forward mortgage loan limits, the new HECM loans limits are
effective on loans insured or after Nov. 6, 2008. This is the first
time that a single limit applies to these mortgages nationwide. As
in previous years, the special exception areas of Alaska, Hawaii,
Guam, and the Virgin Islands may have higher loan limits. Starting
in January 2009 counties in those areas may have loan limits of 115
percent of area median prices, where that amount is above $417,000,
up to a ceiling of $625,500.
Reverse mortgages allow homeowners age 62 and older to borrow
against the value of their homes without selling them. Homeowners
can select a lump-sum payment, monthly payments or tap into a line
of credit. No repayment is required as long as a homeowner lives in
a home with a reverse mortgage. The reverse mortgage is repaid,
with interest, when a homeowner sells the home or dies.
HUD will inform mortgage lenders and brokers of the new limits
through a mortgagee letter posted on www.hud.gov and www.fha.gov.
HUD is making available comprehensive listings of the new loan
limits in all counties throughout country. Downloadable files are
available for FHA Forward Loans, FHA HECM loans, and Fannie Mae and
Freddie Mac purchases on the HUD website. The limits are determined
by the county in which the property is located, except that for
properties located in metropolitan statistical areas the limit is
determined by the county with the highest median home price within
the metropolitan area.
