FHA Increases Loan Limits

Sizable increases in key mortgage limits today by Fannie Mae and Freddie Mac may finally deliver the first dose of real help for the troubled housing market. The two quasi-governmental companies that underwrite the majority of the nation’s home loans are now offering higher mortgage limits in many counties across the United States. This means that many new would-be homeowners would not have to rely on high-cost jumbo-loans to finance their homes. It also provides a lifeline for credit-impaired homeowners who need to refinance out of unaffordable, adjustable-rate subprime loans.

These new limits should be of most help to those living in areas that had expensive housing- such as Southern California and Florida. Many are predicting that it would be a great stimulus to the market- by raising loan limits, it deepens the opportunity for more homes to be able to purchased at more competitive rates. And it allows buyers to reach up and purchase high-priced homes. The move should also help provide an alternative to subprime buyers who previously used mortgage loans with terms that were unsustainable in the long run.

FHA mortgages aren’t as volatile as the now-defunct subprime loans because they’re backed by the federal government. In addition, FHA borrowers who run into financial trouble are guaranteed to get counseling. Officially, the loan limit changes are temporary and will expire at the end of 2008, but it is clearly a move in the right direction. It will be interesting to see whether or not this will help solve the problems we’re seeing today in the housing markets worst affected…

Popularity: 19% [?]