On October 1st the Federal Housing Administration will drop its loan limits in some eligible counties throughout the country. All of Chicagoland will be effected as the current maximum loan limit of $410,000 will decrease to $365,700. FHA mortgages have been an attractive option for many buyers in recent years due to the potential to use as little as 3.5% down on a home.
"The (FHA) product's market share grew exponentially as the credit markets seized up, and the agency now guarantees almost one in three mortgages for single-family homes." (Chicago Tribune, August 17th)
What affect the decrease will actually have on the Real Estate market once the new loan limits go into place in October remain to be seen. It is possible that decreasing the FHA limit could put more pressure on prices but some think that, at least in the long term, the FHA decrease is overdue.
"In a recent report, the George Washington University's Center for Real Estate and Urban Analysis found that 'in the wake of significant declines in home prices, we believe FHA could reduce its loan limits by approximately 50 percent and still almost entirely satisfy its target market. That would reduce its current large market share, which is difficult for FHA to manage.'" (Inman News, August 19th)
Good news exists with Fannie Mae and Freddie Mac-backed loans in Chicagoland - conforming loan limits will remain at $417,000.
In this industry you have to stay up to date with ever-changing rules and regulations. Add this one to the list!