The final version of the Stimulus Act was signed by the president on February 13th and FHA maximum loan limits will be increased. There has been a lot of confusion and misinformation out there, probably because there's a lot that we don't know yet.
Here is what we do know:
- FHA maximum loan limits are increased
- The increase is for FHA loans that are approved on or before 12/31/08
- $271,050.00 is the new FHA floor, based on 65% of Fannie/Freddie limits. The previous floor was $200,160.00 based on 48%of Fannie/Freddie limits.
- The new limits will be the lesser of:
-125% of the Area Median Price; or
- $729,750.00 which is 175% of 2008 Fannie/Freddie limits.
- HUD has 30 days after enactment to define the Area Median Prices in the country and publish the new loan limits
This means that ALL FHA limits will be increased by something! The area with low median prices will go to $271,050.00. The areas with high Area Median Prices can go as high as $729,750.00.... BUT, until we know what HUD will use for Area Median Prices, we won't know what any of the exact amounts are.
Lets assume that HUD uses the same Area Median Prices that they have been using all along for FHA loans. The current maximum FHA loan amount is based on 95% of the Area Median Price. To figure out what 125% of median is: divide the current maximum loan amount by 95% to arrive at the median; then multiply times 125% to arrive at the new figure.
Example: Maricopa County MSA, the current limit is $263,150.00 Divide by 95% to arrive at $249,992.00; the area median price. Multiply by 125% for $312,490; the new maximum loan amount.
Again, we need to wait and see what HUD will use for "AREA". If HUD redefines the Area, these calculations will not work.
We should know the answer to all of this in the next 30 days. I will let you know as soon as it has been made clear for us lenders to finance at the new higher loan amounts.
Judy Giel
Branch Manager
First Horizon Home Loans
Office: 602-667-4910
Fax: 1-866-634-0659
COMMENTS BY GENE URBAN:
We get a lot of calls asking about the new loan limits that are part of the congressional stimulus plan. Information given to us suggested the raising of loan limits would allow many people to refinance their adjustable loans and stabilize their payment amounts.
We, at the Urban Team, have been taking a "wait and see" attitude on the impact of this legislation and based on what we knew, did not hold much hope for the plan. As Judy has outlined, the loan limits will not be raised much in Arizona and will not have far reaching effects.
What saddens me is the Washington Talk emphasized the upper loan limit rise to $729,750 and only whispered the "or" clause. Lots of people are counting on refinancing under the new program and they are going to be disappointed.
Gene Urban... The Urban Team
