FHA Lending Limits - What does that mean to me?
If your thinking of buying a home there is a lot to think about. 2014 has made it even harder as we see from Liz's report on limits on the FHA program. Now if your thinking about buying a home using the FHA program with as little as 3.5% you can only borrow up to $355,350. That means that if you buy over that you'll need a larger down payment. For other areas see chart below.
FHA Lending Limits - What does that mean to me?
As a home buyer, you may have heard a lot of chatter about the FHA lending limits changing in 2014. Most people would say, so what? But it does affect many families ability to buy in certain areas. I’ll attempt to show you why…
Firstly, what exactly is the FHA?
The Federal Housing Administration (FHA) was created as a result of the great depression set up to housing assistance. Back then and now, many homebuyers don’t meet typical lending criteria like credit scores, or financial requirements. The FHA was set up to help everyone who wants a home, a way to get a home. Its one of the most lenient lending organizations (outside of the Veterans Administration – VA loans).
How much money do I need to use FHA lending?
Typically home buyers are required a minimum of 3.5% money down to use FHA. You can certainly do more, but if you are a home buyer with sufficient credit and a good sized down payment, you will want to consider using a Convention Loan instead.
Lending Limits now in place!
Recently the FHA has tightened its lending limits in a given area. They use the price of the average house in any given spot, and determine how much they will allow a buyer to borrow.
Keep in mind, this doesn’t limit the price of the home you can buy, just how much you can borrow. That would then fall back on the home owner to come up with the difference between the loan and the sales price of the home.
In December of 2013 the Department of Housing and Urban Development (HUD), did announce that the county loan limits were to be decreased effective Jan. 1st, 2014.
Please see the chart below that explains the difference by county (California shown).
CA County 2013 LIMITS 2014 LIMITS
Inyo County 437,500 369,150
Kern County 368,750 271,050
Kings County 325,000 271,050
Lake County 401,250 271,050
Lassen County 285,000 271,050
LA County 729,750 625,500
Madera County 425,000 271,050
Marin County 729,750 625,500
Mariposa County 412,500 322,000
Mendocino County 512,500 373,750
Merced County 472,500 271,050
Monterey County 729,750 483,000
Napa County 729,750 592,250
Nevada County 562,500 477,250
Orange County 729,750 625,500
Placer County 580,000 474,950
Plumas County 410,000 336,950
Riverside County 500,000 355,350
Sacramento County 580,000 474,950
San Benito County 729,750 625,500
San Bernardino County 500,000 355,350
San Diego County 697,500 546,250
San Francisco County 729,750 625,500
San Joaquin County 488,750 304,750
San Luis Obispo County 687,500 561,200
San Mateo County 729,750 625,500
Santa Barbara County 729,750 625,500
Santa Clara County 729,750 625,500
Santa Cruz County 729,750 625,500
Shasta County 423,700 273,700
Siskiyou County 293,750 271,050
Solano County 557,500 400,200
Sonoma County 662,500 520,950
Stanislaus County 423,750 276,000
Sutter County 425,000 271,050
Tehama County 312,500 271,050
Tulare County 325,000 271,050
Tuolumne County 437,500 331,200
Ventura County 729,750 598,000
Yolo County 580,000 474,950
Yuba County 425,000 271,050
Lets look at Riverside County (my resident county) for example.
You will note that in 2013, FHA was willing to loan up to 500,000 to an FHA buyer to purchase a home. That dropped to $355,350 in 2014.
To give you some idea of how that will affect you as a buyer…
Lets look at some cities in Riverside and the average price of a home…
(According to Truila’s stats taken on 1-7-14)City Average Sale Price
Temecula 360,000
Murrieta 322,000
Menifee 292,000
Winchester 310,000
Corona 391,000
Riverside 285,000
Lk Elsinore 275,000
Canyon Lk 290,000
Why is that important to know?
Well given the average sale prices today, it really isn’t but as prices climb, as they historically already have, it will be very relevant.
If your family wants to live in Temecula, for example, you will be forced to come up with a larger down payment to live in the average home if using an FHA.
Is this a good time to buy?
Many may be asking, is this still a good time to buy? Well, interest rates are still fairly low. Not for long though. Rumor has it that the rates are expected to climb to 5.5% by year end. Costing you more each month on your monthly payment.
Prices are also expected to climb…
Demand is growing with an increasing number of young people having families. Although supply has certainly returned, it may not be able to meet demand as Summer fast approaches.
Don’t be caught in the buying frenzy.
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