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New Changes Affect FHA Loan Limits

October 5, 2011

All good things must come to an end, and on October 1st, the increased loan limits on many federally insured mortgages, including FHA loans, reverted to pre-2008 amounts.

Although the change affects all federally insured loans, including mortgages guaranteed by Fannie Mae and Freddie Mac, FHA loans are sure to be the option most affected by the change because of the sheer volume of borrowers who use them.

The maximum FHA loan amount, which varies from county to county, dropped to $625,500, down from $729,750. In some counties, particularly high-cost housing markets such as California, the new maximum amounts are significantly lower in some counties, which may force buyers to rethink their options or wait to make a home purchase.

By all accounts, the number of buyers who are impacted is relatively small – the Federal Reserve calculated that approximately 1.3% of Fannie and Freddie-insured loans funded last year would have been affected by the lower limits, and if you included FHA purchases, it added another 2.1%.

Jumbo loans may fill the gap. The Federal Reserve reports that if these lower loan limits had been in place in 2010, there would have been an estimated 50 percent increase in the size of the national jumbo market for home purchases. Clearly there is opportunity to satisfy the needs of borrowers with alternative products, such as jumbo loans.

We offer many portfolio products that may be a good fit for those customers who need higher limits or have other specific needs. Your loan officer can provide you with the details so you can provide the best mortgage choices to your customers.

Learn more about FHA and Jumbo Loans on our website: http://guarantymortgage.shelter-mortgage.com

 

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