Getting a loan has become more difficult since the 2008 housing downturn. Lenders have become more strict with their underwriting guidelines. This has made getting Federal Housing Authority (FHA) financing a popular choice for home buyers. FHA loans are less stringent and more forgiving of credit blemishes than conventional loans yet still offer attractive interest rates.
However, starting January 1, 2014, many homes in Washington County will be priced out of FHA loan limits as the FHA is changing their loan limits. This may have a significant impact on Washington County home buyers and sellers. In 2013, the FHA loan limit was $372,500. For 2014, the FHA loan limits drops considerably to $278,300
While this decrease is dramatic, it’s no where near as massive as some of the drops that will be seen in northern Utah. Salt Lake and Tooele County will be among the hardest hit, with loan limits falling from $729,750 to $300,150.
Why the Drop in Loan Limits?
Several changes are occurring for FHA loan amounts for 2014. These include:
- The FHA will only be able to guarantee loans up to 115% of the median home price ranging between $271,050 and $625,500. In 2013, they guaranteed loans up to 125% of the median home price with a ceiling of $729,950.
- The FHA has recalculated home prices, where were previously set in 2008 when home prices were generally much higher
- The higher FHA loan limits were enacted by congress in 2008 and were extended several times due to the weak state of the housing market. The higher loan limits now expire on December 31, 2013.
- The FHA is seeking to lure more private capital back to the mortgage sector as the housing market recovers.
You can learn more about the HUD changes on their website.
How it Affects the Real Estate Marketplace
These new limits are putting a real urgency on home buyers looking to get their FHA loan process completed before the January 1, 2014 changes in loan limits take place. Home buyers seeking loans for more than $278,300 in 2014 will have to secure other lending sources or otherwise make up the difference. Loan limits for the Fannie Mae and Freddie Mac have kept their cap at $417,000 for 2014.
With a still fragile housing market, the National Association of Realtors, the National Association of Home Builders, and the National Mortgage Association have both expressed concern over the unexpectedly large decrease in the FHA loan amount limits.
Contact the Ryan Kramer Team to learn more about how the FHA loan amount changes affect your situation as a Washington County home buyer or seller.