How Will Lower FHA Loan Limits Affect You

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How Will Lower FHA Loan Limits Affect Colorado

Rumors have been circulating for months speculating on the substantial drop we’ll see in FHA loan limits and how they will impact the housing market. As a high cost state, Colorado will most definitely feel the blow of these changes in areas like Aspen, Vail, Breckenridge and other resort communities.

As the deadline draws near, it’s apparent that these rumors will turn into reality on October 1, 2011 if Congress doesn’t get involved.

Congress extended FHA loan limits in 2009, 2010, and again in 2011 but now finds that the limits exceed necessary levels. The reduction in loan limits would not only affect high cost areas, but FHA, Fannie Mae & Freddie Mac loan limits across the state of Colorado.

Will the New FHA Loan Limits Affect Colorado

Colorado is an area that will be severely impacted by the change as loan limits drop anywhere from $50,000 - $153,000 depending on the county. The loan limit In high cost Colorado areas for a single-family home are currently $729,750 but would drop on October 1st to $625,500.

According to the National Association of Home Builders, the impact will be widespread. More than 620 counties across the country will be affected as an estimated 3.87 billion homes fall outside the FHA loan limits.

Current FHA Limits vs. October 2011 Limits

According to a HUD report, as of April 2011 “approximately 2 percent of endorsed loans by count (6,673) and 7 percent by dollar volume ($2.8 billion) would have been affected”

If those numbers are accurate then only 2% of purchases would have fallen outside FHA loan limits. In essence, the impact to our community would be small.

However, when you see the new limits, the numbers tell a different story. Below are a few of Colorado’s hardest hit counties.

County               Current             FHA Loan Limit Limit as of 10/1/2011           Difference

Eagle County       $729,750           $625,500                                                          ($104,250)

El Paso County  $325,000          $271,050                                                          ($53,950)

Gunnison County $433,750           $357,650                                                          ($76,100)

Hinsdale County  $557,500           $427,800                                                          ($129,700)

San Juan County $425,000           $271,050                                                          ($153,950)

Summit County   $729,750           $625,500                                                          ($104,250)

Teller County      $325,000           $271,050                                                          ($53,950)

Weld County       $417,500           $271,050                                                          ($146,450)

It is difficult for me to understand this decision given the current state of our market. While I appreciate that FHA’s main goal has always been to help the “underserved market” and that high cost limits may not necessarily reflect that, this change could have a severe impact on that market.

With the reduction of jumbo loan options, FHA has been a refreshing alternative to the significantly higher interest rates on Conventional loans. Without the higher loan limits that market may come to a screeching halt.

Is this what we need in a down market? What are your feelings in response to these changes? I’d love to hear from you!

How You Can Get Involved

Real Estate and Mortgage professionals have the opportunity to let your voice be heard. Don’t let these changes happen without taking a stand! Realtor Action Center | Call for Action



How Will Lower FHA Loan Limits Affect Colorado was written by Rebekah Radice.


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Michael Kitsch
Coldwell Banker - Katy, TX

Well, the more things change.....  Hope that someone gets a grip on the situation.  And soon!  Good luck to you where you are.

Jul 07, 2011 11:32 AM #1
Rob Lang
At Home Kansas Team Powered by Keller Williams Partners Inc / - Lawrence, KS
Local Expert in Lawrence Kansas Real Estate Homes

Thank you for sharing this. I hope someone finds exactly what they're looking for here.

Jul 07, 2011 11:33 AM #2
Rodney Mason
Angel Oak Home Loans - Atlanta, GA
AL, FL, GA, SC, & TN

We are going to see a little over a $25K drop in metro Atlanta counties.  Yours will definitely a larger drop than ours.  Of course, we are currently only at $346,250.

Jul 07, 2011 02:04 PM #3
Mimi Foster
Voted Colorado Springs Best Realtor

This needs to be shouted from the rooftops.  It's almost like they are TRYING to make it difficult for Americans to buy a house.

Jul 07, 2011 05:06 PM #4
Rebekah Radice
Imagine WOW! Digital Marketing Agency - Burbank, CA
Social Media Marketing, Coaching & Training

I so agree Cheryl!  Hopefully its sooner than later!

That's still going to hurt Rodney.  Every little bit counts in my opinion and puts one more homebuyer out of the FHA market.

Yes it does Mimi and we're just the ones to do the job!

Jul 08, 2011 09:36 AM #5
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