FHA Lowers Loan Limits

From a recent announcement, FHA loan limits will be dropping as of September 30, 2011.

HUD LogoThe Department of Housing and Urban Development issued a mortgagee letter on August 19, 2011 outlining new limits to the FHA loan program. The new loan limits, which will be in effect as of October 1, 2011 unless legislation is enacted before then specifying new loan limits or timeframes, will impact most Austin area counties.  The FHA loan limits in effect currently will drop, meaning fewer properties will now qualify for FHA loans.

FHA Loan Limits

The new limit is set at $271,050.
The previous limit was $288,750.
These are loan amounts, not the sales price.

The new sales price limit will be $280,881 (assuming 3.5% down for FHA loans).
The old sales price limit was at $299,223.

When do the changes take effect?

For all new case numbers, the changes take effect on October 1, 2011.

For loans with existing case numbers AND Direct Endorsement underwriter approval prior to September 30, 2011, the old loan limits will be in effect.

Unlike many previous FHA changes, this one is not keyed to only the case number. DE underwriter approval is also necessary to extend the limits.

Who is impacted?

Buyers who have initiated the loan process for amounts between the old and new limits, but have not obtained DE underwriter approval are at the greatest risk.  For these buyers, it is advised that DE underwriter approval be completed by September 30, 2011 or the deal will not be approved for closing.

Sellers (including builders) whose list price is greater than $280,881, but lower than the original limit of $299,233 are also at risk for a longer and more difficult sales cycle.  Homes listed in this price range will no longer be eligible for FHA loans.  Because down payment restrictions are lower for FHA loans, the new loan limits will remove a certain amount of home inventory from those who are using FHA financing. If you are selling your home and it is listed between these prices, it is advised that you speak with your realtor about how the new limit may impact your ability to attract potential FHA buyers.

We are anticipating the release of a new ceiling for our counties at anytime from HUD, but until then, the new rules are slated to take effect on October 1, 2011. Until further notice, the current floor will also become our ceiling for loan limits.

As of today, there were 314 homes listed in the ABOR MLS system between the old limit and the new limit.  Realtors who have these listings should be contacting their sellers about lowering the price to the new FHA loan limit. At the very minimum, sellers should be told to expect offers below the new sales price limit by interested buyers who must use FHA in order to make their purchase.

Each county is evaluated separately and a determination made regarding the new loan limits. The drop is not equal for all areas and some areas will not be impacted by the new changes. As of today, Travis, Williamson, Hays, and Bastrop counties are all scheduled to accept the new loan limits as of September 30, 2011.

For more information, please click here.

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About missionmortgage

A full-service professional mortgage banker providing lending in Texas for over 25 years. Our main office is located at 901 S. Mopac Expwy, Barton Oaks V- Suite 120, Austin, TX 78746 with branches in Lakeway, Houston, and Sealy. Mission Mortgage has been ranked as a Top 10 Mortgage Company in Austin for the past 7 years (Austin Business Journal).
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