Loan Limits Become Complex in 2009

by Peter G. Miller
November 11th, 2008

Anybody notice something peculiar about the new conforming loan limits for 2009?

If you get a bright and shiny conventional mortgage the loan limit in the continental United States is generally $417,000. Go with an FHA loan and in many areas the maximum loan amount will be $625,000.

At first this seems like a complete reversal of the usual way mortgage limits have worked.

In the past the minimum and maximum FHA loan limits were simple to calculate: Take the conventional loan limit and multiply by either 48 percent or 87 percent. In other words, the maximum FHA loan amount was always smaller than the amount available with conforming loans.

But now the deal is different.

As we have pointed out, FHA mortgage limits differ depending on whether you are in a low-cost or a high cost area, or whether you are inside or outside the continental United States.

Now the same concept has been picked up for conventional loans.

Under the 2009 conventional loan limits announced by the Federal Housing Finance Administration (FHFA) the general limit is $417,000. But — and here’s the big news — the concept of one conventional loan limit is gone. Instead, there are now different loan limits for different areas.

As FHFA explains, “regardless of the area median home price, the loan limit cannot, in general, exceed $625,500 (1.50 times the 2009 conforming loan limit). The exceptions are properties in Alaska, Hawaii, Guam, and the Virgin Islands, where that range is 50 percent higher ($625,500 to $938,250). The 2009 conforming loan limit of $417,000 is in place everywhere else. Loan limits for 2-4 unit properties are proportional to the 1-unit limits.”

In other words, the $417,000 conventional loan limit is not always the conventional loan limit.

For example, for a single-family home the maximum conventional loan amount is $625,000 in Los Angeles, $458,850 in Virginia Beach, $426,650 in Providence (RI), $713,000 in Kapas (HI) and $448,500 in Naples (FL).

The bottom line: When someone tells you that the maximum loan amount for an FHA loan is $625,5000 or that conventional loans are limited to $417,000 you have to say: Whoa! Let’s take a closer look.

Here’s where to get more information:

___ The conventional loan chart for high-cost areas can be found by pressing here.

___The FHFA chart for conventional loan limits in all counties is available by pressing here.

___Local loan limits for FHA mortgages can be viewed online by going to HUD’s loan limits page.

Before you go house hunting or consider refinancing, speak with FHA lenders. Why? Because areas can be re-defined as “high cost” at any time so you may be able to get a larger mortgage than expected. Speaking with lenders is the best choice, the one that should account for any loan limit changes, updates or revisions.

  •  | 
  •  | 
  •  | 


This entry was posted on Tuesday, November 11th, 2008 at 3:41 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.

One Response to “Loan Limits Become Complex in 2009”

  1. s2kreno Says:

    Okay, now I’m really confused. Could a borrower who doesn’t qualify under HARP because the original loan was a jumbo (not Fannie or Freddie, he’s sure)refinance under FHA? He has about 15% equity but are there any places now where FHA limits would exceed Fannie / Freddie limits?

    I did advise him to check makinghomeaffordable.com to see if his DTI would make him eligible for a modification. The guy has a perfectly good 5/1 hybrid but is unnerved about an impending ARM conversion. No credit problems either.

Leave a Reply

Are you a Mortgage Lender specializing in FHA Loans? Join our mortgage directory today! Homeowners click here to appy for FHA Loans