Upcoming FHA Loan Limit Changes

Loan limits are expiring Sept 30th!

Loan limits are changing! Loan limits are changing! Is the sky falling? No, the sky is not falling and this change will have some impact on locally, but on our entry level housing ($400,000 – $500,000) the change will be pretty minute.

As we already wrote about in a past post, unless Congress extends the expiration deadline, Federal Housing Administration loan limits set in 2008 will drop a bit in our area as of October 1st of this year. Congress had raised the loan limits at that time to stimulate the economy/housing market to provide higher loan limits in our area to a current FHA limit of $729,000. The changed limit will now take us down to $625,000, which is still a reasonable loan limit for this area, especially if you are looking at a home that is priced beneath the $that new threshold limit.

While it might not effect those of you who are looking at a home in the $500,000 range, it does have some impact on others who are just above the $625,000 number:

1. Higher down payments

2. Higher mortgage rates

3. Stricter loan qualifications

If you do fall into the upper echelon, you might be forced to look at a conventional product right now that forces you to put more money down (conventional loans require at least 5% down), rates tend to be a bit higher (usually a quarter point), and a conventional loan product will force you to have excellent credit history and a stable employment track record.

 

Time to get off the fence!

If you are in the category that might be impacted by higher loan limits, here are four things you should know now:

1. Purchase now – don’t sit on the proverbial fence any longer. Finding a house and applying for a mortgage (even if you do a long escrow) will help you benefit from today’s products and rates.

2. County-wide drop – this limit drop is throughout Orange County, it will effect those looking outside Costa Mesa as well.

3. Loans currently in the $625,000 to $729,500 category will be considered non-conforming jumbo loans which have interest rates that are as much as 1.5% higher. That is a significant impact on your monthly dollar.

4. FHA loans have been fantastic for our local marketplace because they have allowed those with bad credit or past issues (bankruptcies, foreclosures) to get past more stringent conventional guidelines and actually purchase a home sooner than later.