The U.S. Department of Housing and Urban Development (HUD) published their new guidelines for FHA and conforming loans. FHA, Freddi Mac and Fannie Mae loan limits are now calculated at 125 percent of the HUD published median prices. In other words, if the area you are in has a median home price of $200,000, HUD calculates 125% of that, which comes to $250,000. If your area's previous loan limit was less than $250,000, it will now be increase to $250,000.
In Miami-Dade area where I do business, the previous loan limit was the previous maximum loan limit of $417,000. Now with this new guideline in effect, the new limit is $423,750.
So the question is, does that make buying easier for someone in Miami to buy for example? It makes getting a loan easier only if your loan value is between $417,000 and $423,750. Not a huge help if you ask me.
However, the maximum new loan limit based on the new guidelines is $729,750. And there are many areas with very high median home prices that may benefit greatly from this new limit. For example, Orange County, California gets the maximum of $729,750.
How does this new HUD loan limit make it easier to get a loan?
Some of you might be wondering how this HUD loan limit increase will help someone get a loan. Well, lenders prefer to give conforming loans (i.e. loans within HUD limits) to buyers, because they can sell them on the secondary market (Fannie Mae, Freddi Mac). This gives banks both the security to know they have a guaranteed buyer for their loan and the liquidity to then go out and offer more loans. Since this is an easy equation for banks, they offer better interest rates to buyers for these types of loans.
How to determine the new loan limit in your area
To calculate the new HUD loan limit in your area, simple go to https://entp.hud.gov/idapp/html/hicostlook.cfm and enter your state and county. You can leave the rest blank if you don't know what to enter.
Comments(3)