FHA Loan Limits Decrease in 2014

Filed under: Market Comentary

imagesAccording to a recent report, the Department of Housing and Urban Development has just released the updated loan limits for Federal Housing Administration backed loans.

Beginning January 1, 2014, the national maximum loan limit for FHA financing will be reduced, as specified by the Housing and Economic Recovery Act of 2008, also called HERA. The loan limit will be reduced from $729,750 to $625,500 in high-cost areas.

In low-cost housing areas, the FHA will maintain the standard loan limits and they have stated that they will begin focusing more on lower income borrowers. This is opposed to the high income earners looking to take advantage of low mortgage rates and down payment requirements.

The loan limits in about 650 counties across the USA will now be lowered due to the upcoming change. Congress originally had planned on lowering FHA loan limits under HERA in 2009, after loan limits were increased under the Economic Stimulus Act of 2008. However, since the housing market is in desperate need of help, the cap was delayed for four years.

Click Here to Access FHA Loan Limits for All US Counties

Due to its flexible debt-to-income requirements and low down payment options, the FHA loan has become extremely popular in today’s market.

The typical FHA financing requires a 3.5% down payment of the purchase price. But, certain lenders can offer a .5% down payment option with the remaining 3% as a second mortgage, which allows home ownership a possibility for borrowers with little money saved to buy a home.

FHA Commissioner Carol Galante was quoted as saying, “As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play. Implementing lower loans limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still under served.”

Officials said last week that the loan limit declines, which have been anticipated, would help the agency reduce its role in the market.

According to the report, the maximum loan limit varies by county and if you are looking for an FHA loan, it is vital to make sure the home you want to purchase fits within these designated guidelines.

Click Here to Access FHA Loan Limits for All US Counties

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