The Department of Housing and Urban Development announced last Friday that the maximum loan dispensation for 650 areas judged to be “high cost areas” will be reduced beginning in January. A formula set by the Housing and Economic Recovery Act (HERA) has served as the basis for the new calculation of FHA loan limits, and is based on median home prices. The update maximum loan limit will be reduced from $729,750 to $625,000.
As Mortgage News Daily reports, FHA Commissioner Carol Galante has expressed the opinion that as the housing market recovers, and private capital regaining shares of the market previously lost, the FHA now has the opportunity to focus on borrowers that are more immediately reliant on FHA services, “it is important for the FHA to evaluate the role we need to play.”
With that aim in mind, FHA loan limits for lower cost areas will be maintained at $271,050.
Of the high cost areas that will be affected, eighty-one areas have already adopted to new loan limit. Four areas in Hawaii have been allowed a higher limit of $721,050 for loans in Urban Honolulu.
You can check the current limit for your area by county here.
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