The Federal Housing Administration
(FHA) has now joined the Federal Housing Finance Agency in raising the dollar limits
for loans that qualify for FHA guarantees.
Last week FHFA raised limits for Fannie Mae and Freddie Mac loans to
424.100, a number which forms a basis for some of the FHA changes.
The new limits, which will be
effective for loans with case numbers assigned on or after January 1, will
constitute a slight increase in 2,948 U.S. counties; limits will remain at 2016
levels in 286 counties.
In so-called high cost areas, the
national “ceiling” will increase to $636,150 from $625,000. The “floor” will increase to $275,665 from
$271,050. The loan limit ceiling is 150
percent of the national conforming limit ($424,100) while the floor is set at
65 percent. The floor applies to those
areas where 115 percent of the median home price is less than 65 percent of the
national conforming loan limit. Any areas where the loan limit exceeds the
“floor” is considered a high cost area.
The maximum claim amount for
FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages,
will increase to $636,150. This amount is 150 percent of the national
Conforming loan limits had remained
unchanged for ten years but FHA limits were adjusted several times over that
period. According to Katie Jones,
writing for the Congressional Research Service, when Congress enacted the Economic
Stimulus Act of 2008 it temporarily increased the maximum mortgage amounts to
125% of area median home prices, with a floor of $271,050 and a high-cost area
ceiling of $729,750. This was done as
both public and private lending standards tightened and fewer borrowers could
qualify for loans without FHA insurance or other types of guarantees. The increased loan limits allowed more
borrowers to qualify for FHA-insured mortgages.
Those temporary limits were rolled back in 2013.
FHA calculates forward mortgage
limits based on median house prices in accordance with the National Housing
Act. FHA’s Single Family mortgage limits are set by Metropolitan Statistical
Area and county. Loan limits for reverse mortgages are also calculated but
these do not vary by MSA or county; instead, a single limit applies to all
mortgages in the regardless of where they are originated.
To find a complete list of FHA loan
limits, areas at the FHA ceiling, areas between the floor and the ceiling, as
well as a list of areas with loan limit increases, visit FHA’s Loan Limits Page.