HUD boost FHA limits

As a result of the increases, which went into effect Jan. 1, FHA will insure single-family home mortgages up to $172,632 in low-cost areas and up to $312,895 in high-cost areas.

Last year, the loan limits were $160,176 in low cost areas and $290,319 in high cost areas. According to a HUD news release, the limits five years ago ranged from $121,296 to $219,849. These levels were below the cost of many homes in many communities, and as a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process.

The loan limits for two-, three- and four-unit dwellings also increased. The FHA is sending letters to thousands of mortgage lenders and brokers to make them aware of the higher limits.

“These higher loan limits will help the FHA mortgage insurance program keep pace with the strong housing market while contributing to the Bush Administration’s commitment to create 5.5 million new minority homeowners by the end of the decade,” Jackson said in the release. “The new limits will help create more construction, more jobs, and more economic growth, while increasing homeownership.”

Low-income and first-time home buyers are attracted to FHA-insured loans because the agency requires only a 3 percent down payment.

The new loan limits are part of an annual adjustment HUD makes to accommodate rising home prices. Under federal law, loan limits are tied to the conforming loan limits of Freddie Mac and Fannie Mae, federally chartered corporations that buy and package mortgages.

Higher FHA loan limits don’t cost the government any money, because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA insurance.

The increases also will benefit senior citizens who qualify for FHA-insured reverse mortgages. 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 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.

[[In-content Ad]]