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FHA Jumbo Loans & Mortgages

The FHA has lost a lot of business in the last few years because the limit on their mortgages has been too low.  The formula for setting the cap for FHA insured mortgages was out of date.  Last year a bill was introduced in Congress that mandates several reforms in the FHA regulations.

One of those reforms is that upon passage of the legislation the new cap for loans will be 100% of the median cost of a home in any given metropolitan area.  The minimum FHA loan for those areas will be increased from 48% to 63% of the new limit.

The maximum on an FHA insured loan for 2007 is currently $417,000.  Under the terms of this new legislation, that figure would jump to $788,000 in the San Jose-Silicon Valley area of California and to $748,000 in the San Francisco-Oakland Metropolitan Statistical Area.  There are various metro areas for the New York region – depending on location, the maximum FHA loan will range from the high $400,000s area to $521,000.

There are other adjustments to the regulations that are just as important.  It provides for circumstances under which the requirement for a 3% down payment can be set aside and the FHA loan can finance 100% of the home’s cost.  It also provides for mortgages to be extended to up to 40 years in length.

These new limits are also going to be extended to HUD’s reverse mortgage program, the Home Equity Conversion Mortgage (HECM).  There are other rule adjustments, and another piece of legislation loosening the regulations for FHA loans on prefab housing.

The legislation was put over in 2006, but an inspection of the votes in both the Senate and House suggest that the collection of bills for FHA reform has strong support.  It will certainly pull the FHA back into the housing market with a set of regulations that more accurately reflect today’s reality.  It is also worth noting that since the bills were introduced last year and sent to committee, they cannot be changed by the new Congress.  The FHA will probably be undergoing an upgrade in the very near future.