January 2, 2003
HUD ANNOUNCES HIGHER FHA HOME LOAN LIMITS TO HELP MORE AMERICAN FAMILIES BECOME HOMEOWNERS
WASHINGTON - Housing and Urban Development Secretary Mel Martinez today announced that the Federal Housing Administration (FHA) is increasing its single-family home mortgage limit by more than seven percent.
Effective January 1, 2003, FHA is insuring single-family home mortgages up to $154,896 in low cost areas and up to $280,749 in high cost areas. The loan limits for two-, three- and four-unit dwellings also increased. The FHA is sending letters to thousands of mortgage lenders and brokers to make them aware of the higher rates that can help families.
"The Bush Administration is committed to creating 5.5 million new homeowners by the end of the decade, and increasing the supply of affordable housing is the key to making the dream of homeownership a reality for more people," said Martinez. "These new loan limits will further contribute to this effort in 2003 by expanding homeownership opportunities for many more families while helping the FHA mortgage insurance program to keep pace with the robust housing market."
Low-income and first time homebuyers are attracted to FHA-insured loans because the agency requires only a three-percent down payment.
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.
Four years ago, the loan limits ranged from just $115,200 to $208,800, levels below the cost of many homes in many communities. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process.
The higher FHA loan limits will not cost the government any money, because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA insurance.
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.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet.