We recently learned that, as of January 1, 2014, FHA Loan Limits on high-end homes will be lowered, as expected. “The higher loan limits were on a temporary extension authorized by congress and, without congress passing legislation, will expire at the end of the 2014 year.”
We do not expect this will have a huge impact on the Mr. and Ms. John Doe House-hunters of America. Less than 1% of the Current FHA production will feel the change.
The biggest change will happen in the high-end housing industry. As can be seen below, the cap for single-family mortgages in the most expensive housing markets will drop from $729,750 to $625,500.
Calling this a “new” action is somewhat of a misnomer, because Congress originally planned on lowering FHA loan limits under HERA in 2009. However, loan limits were increased under the Economic Stimulus Act. Then the economic crisis, as well as the mortgage crises caused legislature to delay the change for four years.
Dave Stevens, president of the MBA explained, “The FHA announced new loan limits based on the roll back from the temporary extension…and the 125% to 115% of area median home price.”
Here is a summary of the major changes enacted by this regulation.
1. Going Down! As we stated, the high cost market maximum declines from $729,750 to $625,500 in high cost areas. This will effect mostly metropolitan areas, in approximately 70 metropolitan areas, including Los Angeles, California; New York City, New York; as well as the District of Columbia/Washington D.C.
What To Do If You’re House Shopping: It is critical to know if the house you desire to mortgage falls within the new guidelines. The ceiling (maximum loan limit) of 2014 Standard/High-Cost FHA Loan Limits varies by county, so you will need to do your local research, if you’re shopping for an FHA loan. Below are the minimum to maximum loan limits in 2014:
- One-unit home: $271,050 up to $625,500
- Two-unit: $347,000 up to $800,775
- Three-unit: $419,425 up to $967,950
- Four-unit: $521,250 up to $1,202,925
2. Staying Level: You can see from above that the floor loan limit remains unchanged at $271,050;
3. Balancing The Old And New Rules: The formula for calculating area loan limits between the floor and the cap will be reduced from 125% of area median value to 115%.
The FHA stated plans to focus more on lower-income borrowers. Previously, the FHA had apparently endorsed high income earners who were “taking advantage of low mortgage rates and down payment requirements.”
4. Is This A Tempest In A Teapot?
So, you might ask, what does this mean to our market, here in Florida? President of Palm State Mortgage Company, Pearl D. Lefkowitz, cited the Fannie Mae authorities, and explained, “There are 18 counties in the contiguous U.S. that are “high cost areas,” with their conforming loan limit remaining at $625,500. (None of these are in the state of Florida.) All other counties will remain at the previous $417,000 limit. Non contiguous states, Alaska, Guam, Hawaii, and the Virgin Islands, will remain at their previous limit of $938,250.” She added, “For our purposes, here in Florida, our conforming loan limits will remain the same in 2014. FHA limits may vary slightly from county to county.”
As the housing market continues to recover, this is not the only adjustment in laws and regulations we will see in 2014. Rest assured, Palm State Mortgage will be available to answer your questions and keep you up to the minute on new developments in the mortgage world.
As always, Palm State Mortgage sincerely thanks you for reading our blog. We deeply appreciate our clients, family, friends and blog readers this holiday season. This is the perfect time of year to send our warmest wishes to you, with the following words, “May your days be touched by the wonder and joy of the season!”
