Back on October 1st, FHA loan limits, as well as conventional loan limits, were reduced to $625,500 which was actually a scheduled change. Lawmakers felt that it was time get reduce the government's influence and involvement in all mortgage entities.
Then, it seems like out of no where, FHA's loan limits were increased to $729,750 in high cost areas. What does this mean to borrowers? There are many areas in the country where housing costs are much higher than normal. These areas are usually in metropolitan areas and those suburbs surrounding those areas. In order to purchase a home, borrowers in these areas would require to take on a jumbo mortgage. Jumbo mortgage rates are typically 1% higher than regular mortgage rates. Stricter guidelines and larger down payments are also necessary in order to be approved for jumbo mortgages.
Borrowers now can turn to FHA (Federal Housing Administration) in these high cost areas. The FHA loan limit is determined by the area with the maximum being $729,750. Although it may seem to be a large amount of money, it is probably an average home in these areas where the cost of living is also higher. For those interested in purchasing a home, FHA allows a low down payment of 3.5% with credit scores as low as 580. Home buyers need to remember that the less the down payment, the larger the mortgage amount which means the higher the monthly mortgage payment.
FHA has always made affordable housing available to consumers. It is basically their mission. They have many programs available for borrowing and helping people attain home ownership. Energy efficient mortgages to rehab mortgages are available to borrowers through FHA. Even multi-family home mortgages can be obtained through FHA. Down payment requirements can be obtained in different ways such as gifts, sweat equity and housing grants. FHA also is much more forgiving when it come to credit. They understand that borrowers may go through hard times which affected their credit profile. This is why many people turn to FHA for all of their mortgage needs.
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