Did you know that the Federal Housing Administration (FHA) loan limit is changing? The current standard mortgage limit for a single family home in the high cost DC area is $729,750. This limit, however, will soon be decreasing for loans with a note dated after September 30, 2011.
The FHA insures loans and minimizes the risk for lenders when buyers put down less than 20%. Some research suggests that FHA loans make up 35-50% of all mortgages in the U.S., and are ideal to some buyers, particularly first-timers, because they require only a less-than-perfect credit score and a comparably small down payment (as low as 3.5%).
The new loan limit is set to be reduced to $625,500. While the Mortgage Bankers Association (MBA) is attempting to appeal this decrease to Congress, as of yet, signs indicate that the deduction will go through. President and CEO of MBA David Stephens says that there is still need for the temporary higher loan limits that were established by The Housing and Economic Recovery Act of 2008 and that a decrease in the limit could hinder the ability for consumers to purchase homes or refinance expensive mortgages. Given the nature of DC area home and townhome pricing hovering around current loan limit, if you are in the market to buy a home by the fall, it might be wise to keep the September 30th deadline in mind if you want to utilize an FHA loan.