HUD: New FHA loan limit takes effect Jan. 1
Ceiling for loans in high-cost areas falls to $625,500
Beginning next year, homeowners with Federal Housing Administration loans will no longer be able to qualify for the $729,750 high-cost area loan limit.
Instead, the Department of Housing and Urban Development is implementing a rule passed a few years back that moves the agency's standard loan limit for high-cost areas down to $625,500 for all FHA loans.
The standard loan limit for areas where housing costs are low is expected to remain at $271,050, while the ceiling for FHA-insured reverse mortgages will stay at $625,500, HUD added.
The Housing and Economic Recovery Act of 2008 technically changed the ceiling for high-cost areas, but the financial crisis and slow-moving recovery prompted Congress to delay the standard's implementation.
"As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play," said FHA Commissioner Carol Galante. "Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved."
The rule does come with some special exceptions, which HUD outlined in a public letter. These variations allow exempt counties to obtain loan limits above the national standard when applicable.
The rule impacts all mortgage assignments issued on or after Jan. 1, 2014.
Approximately 650 counties will face lower loan limits when the standard takes effect, according to HUD.