FHA Loan Limits Reduced, Buyers Lose Buying Power

The Federal Housing Administration monitors median home prices throughout the nation.  Its determination of median home prices in a particular area is what drives the FHA loan limit.  This limit varies in different locales. 

What is the current and new loan limit?  What is the criteria for an FHA loan? And what does the reduction in available FHA loan limit mean to local buyers in the market now or the future? 

The Tampa Bay FHA current loan limit is $292,500.  

Over the past 3-4 years, FHA loans have come back into fashion.  Fifteen to twenty years ago, they were all the rage.  As no documentation, stated income and low money down loans became easier to come by, FHA fell out of favor.  With the credit crisis, this loan is now the most popular for homebuyers purchasing under $300,000. 

So with only 3.5 percent of the purchase price down on the loan, you can purchase a $303,000 home. Wrap in your closing costs and that may be your only money down. 

But things are about to change.

Sandy Kracov, Regional Production Manager and Senior Loan Officer for PHH Home Loans, here in Tampa Bay confirms that on October 1, 2011, a new FHA loan limit of $271,200 will be effective.

Sandy notes that "loans in process that do not close by September 30, 2011 will not be grandfathered."

This means that if you are scheduled to close after September 30, 2011 or if your loan is delayed for any reason that you could lose your ability to get that FHA loan if your loan exceeds $271,200 after putting your 3.5 percent down payment. 

If you are waiting on a short sale to finalize this could have a serious impact on your ability to qualify once the approval comes through from the banks if its after October 1, 2011.

More importantly, you qualify to buy less home.  If you have been saving up your 3.5 percent down payment and money for closing costs, don't wait, buy now. Furthermore, interest rates are always a factor.  Although we are at historically low interest rates, there is speculation those rates will rise in the future because they are so low. 

Climbing interest rates and lower FHA loan limits translates to less buying power for today’s local buyer.

Take advantage of favorable conditions and explore your options with a competent real estate professional or a senior loan officer. If you need help or have questions, contact me or leave a comment here at the end of my article.  I would love to hear from you!