UPDATE (December 8, 2014) : This post reflects the revised FHA loan limits, as signed into law November 18, 2011.
For Americans living in high-cost areas, the loan limit "holiday" for conforming mortgages is over. For FHA borrowers, however, limits remain elevated.
In 2008, Congress enacted "temporary loan limits" to help U.S. homeowners.
At the time, the financial sector was in the early stages of crisis. Private mortgage lending had all but disappeared. Financing was scarce for people for whom mortgage loan sizes exceeded Fannie Mae and Freddie Mac's $417,000 limit.
The issue was exacerbated in places like Washington, D.C.; Loudoun County, Virginia; and Potomac, Maryland where homes routinely sell for $1 million-plus. For buyers of luxury homes, without a downpayment to bring the loan size to $417,000, financing was a non-starter and homes went unsold.
So, to help more Americans get mortgages, Congress agreed to let Fannie Mae and Freddie Mac securitize mortgages for more than $417,000, based on a math formula.
The government assigned each U.S. metropolitan area a temporary loan size limit that was 25% above than its local median home sale price. A loan limit floor of $417,000 was established so lower-cost areas such as Cincinnati, Ohio wouldn't be punished by the new math. A ceiling of $729,750 was applied for everywhere else.
The "variable loan limit" concept proved to be a success and was later rolled into the 2008 Housing and Recovery Act which made "high-cost areas" permanent, but with a slightly different formula.
Under the Housing and Recovery Act, loan size limits are equal to 15% more than median home prices with loan sizes not to exceed $625,500. The Housing and Recovery Act loan size limits took effect October 1, 2011.
Although conventional mortgage loan limits have dropped, FHA loan limits remain high. Up to $729,750 is available to finance a purchase, or to refinancing via the FHA Streamline Refinance program.
The new FHA loan limits do more than just help homeowners with "jumbo FHA" home loans. They also help homeowners in places like Philadelphia, Chicago and Cincinnati where FHA loan limits have been raised to match conventional ones.
You can now buy a home with 3.5 percent down while borrowing up to $417,000.
In addition, the FHA loan limits put the FHA Streamline Refinance program within the reach of more U.S. citizens.
The FHA Streamline Refinance program is the FHA's lifeline to "underwater" homeowners. If you have an FHA mortgage and you're current on your payments, no matter how much equity you've lost, the FHA will refinance your mortgage. There's no appraisal necessary and approvals happen quickly.
The FHA's only requirement is that the refinance must provide a bona fide benefit, where "bona fide benefit" is defined as a monthly savings of 5% or more. Most FHA Streamline Refinance applicants save much more, however.
The elevated FHA loan limits last through 2013.
Conforming loan limits and FHA loan limits have diverged -- in some cases, strongly. Loan limits now vary by county and you'll want to make sure you're getting accurate, up-to-date information.
Click here. It's an online Mortgage Loan Limit table. Just key in your state and county -- the form will do the rest.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.