HUD raises single-family loan limits
|January 8, 2004|
FHA will insure mortgages up to $290,319 in high-cost areas
Housing and Urban Development Acting Secretary Alphonso Jackson on Tuesday announced that the Federal Housing Administration has increased its single-family home mortgage limits by more than 3 percent.
Effective Jan. 1, 2004, FHA will insure single-family home mortgages up to $160,176 in low-cost areas and up to $290,319 in high-cost areas. The loan limits for two-, three- and four-unit dwellings also increased. The FHA is sending letters to thousands of mortgage lenders and brokers to make them aware of the higher rates that aim to help families.
"These higher loan limits will help the FHA mortgage insurance program keep pace with the robust housing market while contributing to the Bush Administration's commitment to create 5.5 million new minority homeowners by the end of the decade," Jackson said. "The new limits will help create more homeowners, more construction, more jobs and more economic growth."
Low-income and first-time home buyers are attracted to FHA-insured loans because the agency requires only a 3 percent down payment.
The new loan limits are part of an annual adjustment HUD makes to account for rising home prices. Under federal law, loan limits are tied to the conforming loan limits of Freddie Mac and Fannie Mae, federally chartered corporations that buy and package mortgages.
Five years ago, the loan limits ranged from just $115,200 to $208,800, levels below the cost of many homes in many communities.
As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process.
The higher FHA loan limits will not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA insurance.
The increases also aim to benefit senior citizens who qualify for FHA-insured reverse mortgages. Reverse mortgages allow homeowners age 62 and older to borrow against the value of their homes without selling them. Homeowners can select a lump-sum payment, monthly payments or tap into a line of credit. No repayment is required as long as a homeowner lives in a home with a reverse mortgage. The reverse mortgage is repaid, with interest, when a homeowner sells the home or dies.
HUD is a federal agency that implements housing policy.
Copyright: Inman News Features