Right before Thanksgiving, the Federal Housing Finance Agency (FHFA) announced it will be raising the maximum conforming loan limits for mortgage acquired by Fannie Mae and Freddie Mac from $417,000 up to $424,100 for most areas of the country starting in 2017—the first conforming loan limit increase in a decade.
Now the Federal Housing Administration (FHA) has followed suit, raising its loan limits for most areas of the country starting in 2017. Like the FHFA, which cited a return of house prices to the pre-decline level established in Q3 2007 as the reason for raising its loan limits, the FHA attributed its increase to rising house prices.
“Due to changes in housing prices and the resulting change to FHA’s ‘floor’ and ‘ceiling’ limits, the maximum loan limits for forward mortgages increased in 2,948 counties,” FHA stated in its announcement. “There were no areas with a decrease in the maximum loan limits for forward mortgages though they remain unchanged in 286 counties.”
According to FHA, the minimum national loan limit “floor” is set at 65 percent of $424,100, which is the national conforming loan limit set by the FHFA recently. FHA said that the floor will apply in areas where 115 percent of the median home price is below 65 percent of the national conforming loan limit.
Any areas where the loan limit exceeds the “floor” is considered a high cost area. The maximum FHA loan limit “ceiling” for high-cost areas is 150 percent of the national conforming limit.
FHA did not immediately respond to MReport’s request for additional comment.
The loan limit increases on FHA-insured loans effective on case numbers assigned on or after January 1, 2017, are as follows:
- FHA’s national loan limit ceiling in high costs areas will be increasing from $636,150 up to $625,500. High cost areas are defined by FHA as areas where the loan limit exceeds the floor. According to FHA, 150 percent of the national conforming limit ($424,100) is the loan limit ceiling in high cost areas.
- The floor in high cost areas will rise from $275,665 up to $271,050
- The maximum claim amount on Home Equity Conversion Mortgages (HECMs) is increasing up to $636,150, or 150 percent of the national conforming loan limit, according to FHA
The new higher loan limits will remain in effect until the end of 2017, according to FHA.
Last December, FHA increased the maximum loan limit for forward mortgages in 188 counties effective January 1, 2016, due to increasing house prices.
For more information, visit the FHA’s Loan Limits Page.