FHA Loan limits going up in 2018
FHA loans are popular because they allow lower FICO scores and down payments. The down payment can be as low as 3.5 percent, in fact. Plus, their underwriting guidelines are more flexible, making it easier to qualify. Loan limits going up is welcome news. It means you’ll be able to borrow more if needed.
The Department Housing and Urban Development (HUD) recently announced that FHA loan limits will increase in many parts of the country. This is big news for borrowers who want to pursue an FHA mortgage loan.
In December, the FHA unveiled its new schedule of loan limits for 2018. Most areas of the nation will enjoy an increase in loan limits of 6.4 percent, effective on January 1, 2018.
Only 223 out of 3,234 counties won’t see loan limit changes; 3,011 counties will.
The new loan limit max now increases from $636,150 to $679,650. That’s an extra $43,500. Loan limit minimums rise from $275,665 to $294,515.
These limits are posted online, making it easy to search for FHA mortgage limits in your area.
Why FHA loan limits increased
The FHA had to raise these amounts because it’s required by law to set single family loan limits at 115 percent of median house prices. Note that in November 2017, the median house price jumped 5.8 percent from a year ago to $248,000. That marked the 69thstraight month of year-on-year price gains.
Daren Blomquist, senior vice president for ATTOM Data Solutions, says the new loan limits make sense.
“Home prices continue to rise,” he says. “This is an effort to keep government-backed loans in line with those rising home prices.”Advertisement
Tamara Dorris, adjunct real estate professor at American River College in Sacramento, says this is a move by the FHA to stay competitive in a rising housing market.
“Otherwise, the FHA would lose market share,” she says.
Pros & Cons about this update
Increased FHA loan limits are a positive sign for the housing industry as well.
“Greater access to home ownership that’s in line with rising home prices should help keep demand for housing steady,” says Blomquist. “That steady or even increasing demand means more home sales and rising home prices. And that translates into revenue for those in the housing industry whose livelihood depends on homes being sold.”
Of course, there’s a downside to higher loan limits. It means that housing prices keep going up.
“The hard part is getting incomes to rise at the same rate. That cannot be done with a quick flip of a policy switch, as can higher loan limits,” Blomquist adds. “It cannot help borrowers qualify if their income is not keeping up with home price appreciation.”
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