FHA Loan Limits for 2008

Talk about help from the Federal government for both current home owners & those that want to be home owners. If ever a year in the history for getting an FHA loan, 2008 is THE YEAR.

If you don't know the loan limits (meaning, what the loan amount is permitted by the government for an FHA loan, please read this & then the link at the bottom of this article will take you to a map of the U.S. & you can find the state & the county you live in to tell you what the FHA loan limit is for where you live.

Effective March 6, 2008, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750 (Limits). Overall, the change in loan limits will help provide economic stability to America's communities and give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas. Previously, FHA's loan limits in these very high-cost areas were capped at $362,790.

The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts up to 125 percent of the area median house price, when that amount is between the national minimum ($271,050) and maximum ($729,750). The new minimum and maximum loan limits are based on 65 percent and 175 percent of the conforming loan limits for Government-Sponsored Enterprises in 2008, which is $417,000. The FHA used a combination of existing government data sets and available commercial information to determine the median sales price for each area. The change in loan limits are applicable to all FHA-insured mortgage loans endorsed with HUD’s publication of the increased loan limits today, and it lasts until December 31, 2008.

By increasing loan limits nationwide, FHA will provide much needed liquidity and stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure, FHA's refinancing product. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated with exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

"This is not an easy crisis to address, and there is no silver-bullet, but I know that we can help hundreds of thousands of people keep their homes, and we can calm the waters," said HUD Secretary Jackson.

In January 2009, FHA's maximum loan limit will return to $362,790, unless the U.S. Congress approves bipartisan legislation to permanently increase loan limits as part of the FHA Modernization bill, which is still awaiting final approval on Capitol Hill.

In high-cost markets, the conforming loan limit will be capped at $729,750, while a 125% increase to the median home price means that the original $417,000 conforming loan limit will remain in those markets with a median home price of $333,600 or less.

Furthermore, there is no guarantee that investors who have become wary of anything except traditional, conforming loans will accept the jumbo loans backed by the GSEs as trustworthy investments.

With Fannie Mae and Freddie Mac having to provide triple the capital to guarantee one $600,000 loan as for a $200,000 loan, the GSEs may have trouble with minimum capital requirements amid operational losses.

All said, the GSEs may have access to a larger number of loans, but that may not translate into a very deep dive into the jumbo loan pool.

Employing NAR home value data to analyze where Fannie Mae and Freddie Mac might be able to purchase or guarantee loans above the current $417,000 limit