Today HUD published the new loan limits for FHA, and as expected, it was a big increase, taking the 11 Metro Area Counties to a new maximum of $365,000. The amount of the increase, however, was a little surprising – the highest number we’d heard kicked around was $315,000.00 (not that we are complaining.) Here’s a link to HUD’s new limits, by county.
But don’t book your loan application for the new Super-FHA™ just yet. Though HUD has published these limits, how these new higher-limit loans will be underwitten, securitized and priced in the secondary market is unknown. In other words there may be add-ons in the form of increased fees or rates for these Super-FHA™ loans, and until FHA and Ginnie Mae figure this out and communicate it to lenders rates/pricing won’t be available.
As for our real estate market and the impact we can expect from these new limits? There three groups who’ll get the most run out of this. They are:
FIRST TIME/MINIMUM DOWN BUYERS
Due to the declining market restrictions imposed by Fannie Mae and Freddie Mac (requires a minimum down payment of 5% if in a declining market) an FHA-insured mortgage is currently the only [Technical Aside: As of this second, it is still possible to buy conventionally without a down payment in a few zip codes, but it is a very short list.] financing option available in our market that requires less than 5% down. So, an increase in the limit here will allow a purchase (for qualified borrowers, natch) of up to $365,000 with as little as 3% down, which can be a gift, or come from a non-profit in the form of a down payment assistance grant.
Sellers priced above the old limit ($276k) and beneath the new limit will in theory have a larger pool of qualified borrowers to sell to. More available borrowers = higher likelihood of sale.
Because FHA has more lenient credit and other guidelines, borrowers locked out of a conventional refinance may find a suitable option in this new super-FHA™.