FHA Limits Increase

FHA increases loan limits
Change could help more people get financing and invigorate housing market
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FIND THE HIGHER LIMITS(click here to read more)
To look up the loan limit for a metropolitan area and also to check the limits for multiple-family residences, go to http://www.hud.gov/.
Near the top is a news section called "Sustaining and Promoting Home Ownership."
From there click on "Loan Limits." If you click on "More," and then scroll down to the bottom of the HUD news release, you can also read and print the "Mortgagee Letter," which is the FHA's official notification to lenders of the new program.
By Michael Pollick The government has raised loan limits on FHA loans for most U.S. metropolitan areas, including an increase of more than $100,000 to $442,500 for Sarasota and Manatee counties. In Charlotte County, the new limit is $296,250, a $72,000 increase.The loosening up of Federal Housing Administration loan limits comes at a critical time for housing markets. Because of the credit crunch that began last summer, lenders have made conventional loans tougher and tougher to get. That, in turn, has frozen inventory at already record-high levels in many regions, including Southwest Florida.The looser FHA limit "opens up the door for competitive financing at attractive rates for homes up to $442,500, which is going to be a big assistance in our marketplace for people who might not otherwise qualify," said Steve DuToit, a Realtor in the downtown Sarasota office of Keller Williams Realty.The mandate to raise FHA loan limits came through congressional legislation passed last month, as part of an overall economic stimulus package.Congress also charged HUD with the new responsibility of generating geographically-based loan limits for Fannie Mae loans. These are expected to be available by April 1. Mortgage officials have previously told the Herald-Tribune that they did not expect the limit on these conventional loans in this region to rise above the current $417,000 level.The federal agency's move has fairly broad implications for Southwest Florida.For example, more than half of the homes and condominiums for sale in the Sarasota Multiple Listing Service are priced at $400,000 or less and could thus be financed by a nearly-no-money-down FHA loan. Even homes prices a little higher would fit in the new limits.FHA single-family home loans are only for those who plan to occupy the home. For now, the higher loan limits are temporary, lasting for this year only.FHA programs also include higher limits for two-, three- and four-family homes.The old limit on FHA 30-year, fixed, single-family loans was $336,100 in the Sarasota-Bradenton-Venice area. In Charlotte County the old limit as $224,209."It is really going to open a lot of doors in the community," said Frank Fontanetta, president of Sarasota's Sentinel Mortgage Co. "I think it will be a big impact, to get the market going."In addition to being easier to get than a standard loan, with no credit scoring, FHA loans can be secured with a minimal down payment of as low as 2.25 percent.Fontanetta said he expects to have pricing on the new loans with the higher caps by Friday.Rates in general for 30-year, fixed-rate, FHA loans have been in the low 6 percent range.There are 75 areas in the United States, out of a total of 3,200, that will qualify for the highest loan limit of $729,750. One of these is Monroe County, home of Key West.Other places that will enjoy $729,750 FHA loans are New York, Los Angeles, San Francisco and Washington, D.C.Collier County, with Naples, landed a new single-family FHA loan limit of $531,250. Previously, FHA's loan limits in these very high-cost areas were capped at $362,790."This is important," said HUD Secretary Alphonso Jackson, speaking at a Greater Los Vegas Association of Realtors keynote speech. "Families in high-cost states have been priced out of FHA-backed loans. This has created a vacuum, filled by exotic subprime loans.""Even moderate cost areas like those in the South and Southwest, such as Dallas, Houston, Augusta and Tallahassee will be helped, with most loan limits there rising to $271,050," said Brian Montgomery, another FHA official.The regular FHA 30-year, fixed-rate loan program is called the 202B.Another program, the 203K Streamline Loan, makes it possible to include the cost of expected home improvements when buying a home."It is a renovation loan that allows a borrower to spend up to $35,000 on cosmetic improvements on buying the home and then finance the whole thing," Fontanetta said.Assuming that the basic loan needed to acquire the home was $250,000, under the Streamline program, the borrower could reserve another $35,000 for cosmetic improvements, bringing the loan total at closing to $285,000. That would avoid taking out a credit line or second mortgage for the improvements. The improvement money is held in escrow and drawn to the contractor doing the work.The Streamline loan, which has been in existence for a long time, "allows you to buy property that needs fixing up, like a bank foreclosure, a property that is in distress," DuToit said.Raising the limits on that program also could help the Southwest Florida market to unload some of its excess inventory, a hangover from the construction and real estate boom of 2003-05."This is back to basics," DuToit said.

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