One of the official duties of the new president was to ensure the FHA loan limits would change. With the fall of Fannie Mae and Freddie Mac it has been essential to try and re-stimulate the economy. The stimulus bill has allowed for Fannie Mae and Freddie Mac to guarantee loans at new limits. It has also changed how the FHA loan program works. Three things have recently changed regarding the FHA loan limits. The first is the loan amount which can be awarded to the borrower. The second change is to the FICO score, and lastly the down payment has been modified.
In 73 counties the Federal Housing Administration is allowing for mortgages of $729,000. There are also loans awarded for more than $271,050 in more than 600 counties around the United States. The new limits are being assessed state by state. While the limits mentioned here are the new limits, depending on the state you live in you might not find much has changed. The new limit change occurred to help families in a high cost housing market. The higher cost housing market has been suffering because no one can afford the homes being sold under regular private mortgages.
The government and FHA felt the limits needed to be raised in order to get the economy back on track via these high cost markets. Among the changes to the limit totals is the loan to value. FHA loans through Freddie Mac and Fannie Mae can be 125 percent loan to value in the high cost markets to ensure a sale. This 125 percent loan to value is good for 2009, after which time the current market will be reassessed. Home buyers looking for an FHA loan will need to speak with the available lenders in their area to determine the loan limit they will be awarded. The loan limit will then help the buyer find a home in their price range.
Added to the monetary limits which have changed on FHA loans are the FICO score changes. Prior to 2009 a borrower needed 580 for their FICO score. In April 2009 this changed to 620. The lenders negotiated with FHA to increase the score due to the risk they felt 580 posed.
The next option FHA modified was the down payment required. To obtain an FHA loan one needs to have at least a 5 percent down payment. Before 2009 the down payment required was 3 percent. The change is not too difficult given the various grant programs available. The down payment requirement is different than the 125 percent loan to value we spoke of above. The 125 loan to value is only available in certain areas, and within special circumstances. For a normal FHA loan 5 percent of the purchase price is needed. This provides a 95 percent loan to value for an FHA loan. Borrowers need to understand the FHA loan limits as well as the qualifications regarding the loans in order to apply successfully for the mortgage.
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