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The Clock is Ticking for FHA Changes
Anyone considering a home purchase or a refinance using FHA programs needs to be aware that HUD has announced that changes are coming January 1, 2009. I’ve received notes from several local lenders and want to pass them along.
Loan Limits
HUD has posted 2009 loan limits for FHA loans, and in the Portland metro area, those limits are falling from $418,750 to $362,250 on a single-family residence. Counties affected are Multnomah, Clackamas, Washington, Yamhill, and Columbia. The higher loan limit was a temporary program from Stimulus Package earlier this year, but HUD has set the limit at 115% of the area median price. Note that higher loan limits are available for 2-4 unit properties.
Down Payments
FHA loans are popular for their 3% minimum down payment, but that changes to 3.5% in January. That takes a down payment on a median-priced Portland home at $275,000 from $8,250 up to $9,625.
Cash-Out Refinances
Although no date has been set for this change, the loan-to-value ratio for FHA refinancing with cash out will fall to 85% from the current 95% level. So, on median-priced Portland home of $275,000, the max loan amount would be $233,750.
More at the FHA homepage.
Photo courtesy of The Rocketeer, used under Creative Commons license.
Comments
4 Responses to “The Clock is Ticking for FHA Changes”
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What impact on selling prices will this have, and is a person better off buying now or after the first of the year?
1/1/08 is in the past. Do you mean 1/1/09?
JJ – Thanks, fixed.
JP – I don’t know if there will be a direct impact on prices, per se. The FHA loan limit could shrink the market of buyers in the $375,000 – $430,000 range, but I think bloated inventory levels will cause more pricing pressure across the board than FHA limits.
The FHA loan limit is a demand issue, not a supply one.
In any event, if I were the seller of a property that I hoped to sell for $375,000, and the FHA loan limit suddenly went to $362,250, I would have a hard time turning down an offer in hand of $362,250.
If I were a buyer of that same property today, I’d have a hard time offering much more than the $362,250 for a $375,000 property. Similarly for properties priced slightly higher. For those properties significantly above $420,000, this should have little impact.
In any event, I don’t see where placing lower limits on some buyers will help boost the number of sales or the level of selling prices.
Since there are so many market forces, I am not sure how to measure the impact in the future.