Mortgage Changes to the FHA Loan Limits
In 2014, loan limits will fall in around 650 counties in the United States as well as Puerto Rico. The limits are attached to local home prices, however several changes in how those limits are calculated explain some of the huge drops. As of January 1st, the loan limits are set to lower. The key changes by the Department of Housing and Urban Development to FHA loans are:
1) The high class market maximum will lower from $729,750 to $$625,500 and
2) The floor loan limit will REMAIN at $271,050
3)The formula for calculating area loan limits between the floor and the cap will be reduced from 125% to 115% of area median value.
Home prices have dropped a lot since 2008. The combination of lower median values and lower multiples(115% of those prices rather than 125%) are the reason for these declines.
As far as impact on the housing market next year, around 1% of all homes mortgages in 2012 fell between the old and new limits. However, several metro areas had more substantial shares of purchase loans within the thresholds.
Some industries( Mortgage Banker's Association, the National Association of Realtors and the National Association of Home Builders) have been concerned that some of the loan limits have been substantially lowered and are asking the Department of Housing and Urban Development how these calculations were decided on.
It's all about the government trying to get out of the mortgage business. One way for them to do that is to reduce loan limits. The hope is that private investors will step in and take over investments in the secondary market. Additionally, when this happens, the other hope is that mortgage rates won't skyrocket.
The Qualified Mortgage rules go into effect January 1st and underwriting guidelines are going to become tighter. For more information on mortgages for Columbus OH homes give me a call today.
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