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HUD announces new, permanent FHA mortgage loan limits
WASHINGTON – Nov. 12, 2008 – U.S. Department of Housing and Urban
Development (HUD) Secretary Steve Preston today 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 Dec.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,” says Preston. “These new loan limits will ensure
FHA can continue to 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
many communities. As a result, families who needed FHA mortgage insurance to
qualify were effectively locked out. In some cases, borrowers turned to exotic
subprime loans.
FHA mortgage insurance makes home financing more available to low-income
and first time homebuyers because it’s 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 supported by premiums paid by the 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
loan 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 are Alaska, Hawaii, Guam and the Virgin
Islands, which 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 has a comprehensive listing of the new loan limits in all counties throughout
the country. For more info, go to HUD’s Web site at: http://www.hud.
gov/pub/chums/file_layouts.html.
© 2008 FLORIDA ASSOCIATION OF REALTORS®