"For the last year, housing has remained one of the stalwarts of our economy," said Martinez. "These new loan limits will further contribute to an even stronger housing market in 2002 and expand homeownership opportunities for many more families."

The increase in loan limits will enable more working families to become homeowners and will help the FHA mortgage insurance program to keep pace with the robust housing market. Combined with benefits such as the reduction in FHA mortgage premiums announced last year, the increase in mortgage limits makes FHA an even more attractive home mortgage product.

The increases will also benefit senior citizens who qualify for FHA-insured reverse mortgages. Reverse mortgages allow homeowners age 62 and older to borrow against the value of their homes without selling them. Homeowners can select a lump-sum payment, monthly payments or tap into a line of credit. No repayment is required as long as a homeowner lives in a home with a reverse mortgage. The reverse mortgage is repaid, with interest, when a homeowner sells the home or dies.

The new loan limits are part of an annual adjustment HUD makes to account for rising home prices. Under federal law, loan limits are tied to the conforming loan limits of Freddie Mac and Fannie Mae, federally chartered corporations that buy and package mortgages. The FHA is sending letters to thousands of mortgage lenders and brokers to make them aware of the higher rates that can help families.

A complete schedule of FHA mortgage limits for all areas (https://entp.hud.gov/idapp/html/hicostlook.cfm) is available on HUD's Website.

Read or download Mortgagee Letter 2001-31 - Single Family Loan Production - Increase in FHA Maximum Mortgage Limits.