|HUD No. 01-001|
|Further Information:||For Release|
|In the Washington, DC area: 202/708-0685||Thursday|
|Or contact your local HUD office||January 4, 2001|
HUD ANNOUNCES HIGHER FHA HOME LOAN LIMITS
WASHINGTON - U.S. Housing and Urban Development Secretary Andrew Cuomo today announced that on January 1 HUD increased by nearly nine percent the amount of a home mortgage that it insures, a move that will help thousands of additional families become homeowners each year.
Cuomo said that the new ceilings for single-family homes range from $132,000 for an FHA-insured mortgage loan in a standard area, to $239,250 in high cost areas. The loan limits for two, three and four unit dwellings also increased.
Mortgage insurance is provided by the Federal Housing Administration, a division of HUD. The FHA is sending letters to thousands of mortgage lenders and brokers throughout the U.S. to make them aware of the higher rates that can help families.
"This is great holiday news for many hard-working families across the U.S. because it enables them to become homeowners," Cuomo said. "For nearly 60 years FHA-insured mortgages have made owning a home a sweet reality for more than 30 million American families. Higher FHA loan limits will help continue to push the home ownership rate to more record heights, which will ripple throughout our nation's economy."
The FHA does not make mortgage loans directly, Cuomo noted, but rather insures loans made by private lenders to homebuyers.
Many homebuyers want FHA-insured loans because the agency requires only a three percent downpayment, all of which can come from family or others. In addition, the agency has more lenient credit standards, and allows borrowers to carry more debt than private mortgage insurers typically allow .
Cuomo noted that "when these benefits are coupled with the recent one-third reduction in FHA mortgage insurance premiums, FHA-insured loans become an even more attractive home mortgage product."
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.
Two years ago the loan limits ranged from just $86,317 to $170,362, levels below the cost of many homes in many communities. As a result, families who needed FHA mortgage insurance to qualify for buy a home were effectively locked out.
Cuomo said the higher FHA loan limits are expected to help drive the nation's homeownership rate beyond its current record high of 67.7 percent of all households, which was hit in October. Today 71.6 million American families own their homes, more than at any time in history.
The higher FHA loan limits will not cost the government any money, because the FHA Insurance Fund is supported by premiums paid by borrowers who receive FHA insurance, and not taxpayers.
Cuomo said the higher loan limits will particularly benefit first-time homebuyers and minority homebuyers. About 82 percent of FHA-insured home loans go to first-time homebuyers. FHA insures 42 percent of all home mortgages to African American and Hispanic homebuyers.
The higher loan limits will also apply to FHA's 203(k) Rehabilitation Program, which offers homebuyers an FHA-insured mortgage to finance both the costs of purchasing and repairing homes in older urban areas.
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.