The Department of Housing and Urban Development announced today that the Federal Housing Administration has increased its single-family home mortgage limits by over 7% to $172,632, starting last Saturday. Additionally, the loan limits for two-, three- and four-unit dwellings have risen as well.
In a statment, HUD Secretary Alphonso Jackson said the new limits will assist in creating more construction, jobs, as well as increased economic growth, while increasing homeownership.
In 2004, loan limits were $160,176 in low cost areas and $290,319 in high cost areas. By comparison, as recently as five years ago, the limits ranged from just $121,296 to $219,849. HUD noted that low-income and first time homebuyers favor FHA-insured loans because the agency requires only a 3% down payment. The increase in loan limits are part of an annual adjustment HUD makes to accommodate rising home prices. Under federal law, loan limits are tied to the conforming loan limits of the GSEs.
According to the HUD release, higher FHA loan limits do not cost the government anything since the FHA Insurance Fund is fully supported by borrower paid premiums. The rise in limits is also expected to benefit senior citizens qualified for FHA-insured reverse mortgages. Reverse mortgages are a way for homeowners age 62 and over to borrow against the value of their homes even without selling them. Borrowers can either pay monthly or in a lump sum or even tap into a line of credit. No repayment is needed if the homeowner lives in a reverse mortgage home. This type of mortgage is repaid, with interest, when a homeowner sells the home or expires.