January 03, 2005
HUD ANNOUNCES HIGHER FHA HOME LOAN LIMITS TO HELP MORE AMERICAN FAMILIES BECOME HOMEOWNERS
WASHINGTON - Housing and Urban Development Secretary Alphonso Jackson today announced that the Federal Housing Administration (FHA) has increased its single-family home mortgage limits by more than seven percent.
Effective January 1, 2005, FHA will insure single-family home mortgages up to $172,632 in low cost areas and up to $312,895 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.
"These higher loan limits will help the FHA mortgage insurance program keep pace with the strong housing market while contributing to the Bush Administration's commitment to create 5.5 million new minority homeowners by the end of the decade," said Jackson. "The new limits will help create more construction, more jobs, and more economic growth, while increasing homeownership."
Last year, the loan limits were $160,176 in low cost areas and $290,319 in high cost areas. Five years ago, the limits ranged from just $121,296 to $219,849. These levels were 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.
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.
Higher FHA loan limits don't 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; and 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 and espanol.hud.gov.