FHA Mortgage Guide

New FHA Loan Limits
Earlier this month HUD had announced the new FHA loan limits set in place for January 1^st 2009. If you’re still not sure about the ceiling and floor limits for your specific area, check out our recent post about the new loan limit guidelines. As we’re nearing the end of the year, some FHA lenders have already started implementing these new changes into their lending guidelines.

FHA Guidelines vs. Lender Guidelines
It’s important here to note the difference between FHA guidelines and lender guidelines. Although FHA has set these changes to take effect on January 1^st of next year, you’ll see lenders preparing for these changes by altering their own guidelines. These FHA approved lenders can make these changes “early” because they are free to utilize their own discretionary lending requirements. As far as FHA is concerned, you just need an FHA case number and credit approval before January 1^st 2009. But if you’re an FHA lender, you’ll be closing the doors early to avoid getting stuck with loans that may not go through. Remember, the FHA doesn’t actually lend money, they only insure the loans made by these FHA approved lenders. 

The Coming Changes
The current FHA loan limits have been temporarily increased since February 2008 when the Stimulus Bill took effect. Although the new changes depend on your specific area, most of the new loan limits are being significantly reduced with the ceiling at $625,500 compared to our current $729,750 ceiling. Borrowers who are in between the current FHA ceiling and the expected ceiling changes for 2009 should seriously consider getting off the fence and make a move soon. 

For example, assume you had a loan amount of $650,000 and lived in an FHA high cost area. Under the current loan limits, you’d still be approved for an FHA loan because you are under the ceiling limit of $729,750. But by January 1^st 2009, FHA will no longer approve these loans because they are above $625,500. 

FHA Lender Reactions
It’s likely that more and more lenders will be transitioning to these new FHA loan limits and you could easily see the markets react well before next year. Lenders could add on higher pricing hits for these “FHA Jumbos” or simply require these loans fund by a specific date earlier than January 1^st 2009. Among other changes for next year is the slight increase of a 3.5% down payment requirement, up from our current 3%.

If you’re a potential buyer or thinking of refinancing into an FHA loan, it’s time to get moving. The window of opportunity is slowly closing, and so far, the expected changes seem convincing for individuals to grab up what’s left of FHA before the year’s end.

Check out these FHA resources for more information

This entry was posted on Monday, November 17th, 2008 at 11:20 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.