FHA Loan Size Cut By Half In Some Markets
The size of the biggest mortgage the Federal Housing Administration (FHA) can guarantee is going to drop by as much as 50 percent in some areas of the U.S. in 2014.
Homeowners living in the highest-cost areas of the country will find their FHA loans capped at $625,500, down from $729,750 in 2013.
To get a larger mortgage, you’ll have to turn to the jumbo mortgage market, where you’ll likely pay a higher interest rate because your jumbo loan lacks a government guarantee.
The National Association of Realtors® predicts the maximum FHA loan amount will fall 20 percent or more in 146 U.S. counties and 10 percent or more in 300 counties. In some counties, the maximum size FHA loan will fall by more than 50 percent.
FHA’s website lets you check the loan limits in your county. Be sure to select the 2014 limits if you visit the site.
National Association of Realtors recently wrote to HUD Secretary Shaun Donovan pleading with him to reverse FHA’s decision.
“While the housing market has improved in many areas of the country, the recovery remains fragile and uneven, especially in many of the areas where HUD has most severely reduced FHA loan limits,” NAR’s letter said.
“Many borrowers in areas affected by the reductions rely on FHA-insured products and would not have qualified under the low loan-to-value and tight credit standards currently required by the private market,” the letter continued.
“These conditions leave the American dream of home ownership out of reach for many families. Without access to affordable low down payment financing, families are unable to purchase or refinance homes, and those who wish to sell find it more difficult, all of which will continue to prolong our housing crisis. As proposed, the turbulence these reductions will create runs the risk of reversing progress being made in the economic recovery.”