FHA Mortgage Law Update

Tamsen Butler
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The FHA mortgage law update is largely in response to the mortgage crisis rippling throughout the country. The Federal Housing Administration could not offer refinance relief to many struggling homeowners because of the loan limits in place, but with the update FHA's programs are available to many applicants who didn't qualify before the revision.

Mortgage Law Prior to Update

Before the FHA mortgage law update, the loan limit was a maximum of $362,790. This does not mean that every applicant approved for an FHA loan guarantee had this amount available to him or her, but instead that this was the maximum amount of money a mortgage loan could get approved for and still remain guaranteed by the FHA.

Applicants wanting loans exceeding this amount were not able to receive an FHA guarantee. Additionally, the maximum amount was not available to every FHA applicant because loan limits vary according to the county the home is located in. Counties with a very high cost of living merit the highest FHA mortgage loan limit. Locations eligible for the maximum limit are predetermined by the FHA.

After the Update

With the mortgage law update in place, the new limit goes up to $729,750. Just like the previous limits, the highest limit is not for every applicant. Only borrowers residing in expensive locations are eligible to request this loan amount.

It is important to note that the update is not viewed as a permanent solution to the mortgage crisis. This increase in mortgage limits had an expiration date of January 2009, but the limits have been extended through 2010.

FHA Mortgage Law Update Specifics

How does an increased mortgage limit help assist the ailing mortgage situation? FHA guarantees mortgage loans, and this allows applicants to qualify for loans that they may have not been able to receive without the guarantee. By allowing more people the opportunity to qualify for mortgage loans, it inundates the real estate market with potential buyers. More buyers translates into less homes sitting on the market, and allows real estate market values to appreciate.

Every foreclosure and short sale has the potential to affect the market value of the surrounding homes in the neighborhood. Allowing applicants the opportunity to buy houses helps improve the real estate market, as does giving homeowners the opportunity to refinance an adjustable rate mortgage into a fixed rate thirty year mortgage. The FHA mortgage law update allows for people to qualify for FHA assistance when they would not have before the change because of the higher loan amount.

Exceptions

There are some special exceptions to these new mortgage law updates.

  • Homes such as duplexes and other multi-unit dwellings also experienced increases when the new law came into effect, but these increases are higher than for single-family dwellings:
    • A two-unit dwelling has a loan limit of $934,200.
    • A three-unit dwelling has a loan limit of $1,129,250.
    • A four-unit dwelling has a loan limit of $1,403,400.
  • Some areas of the United States, in addition to certain Territories, have even higher limits. These locations had higher limits prior to the increase, but the loan amounts have been increased again along with the other increases. These areas include:
    • Hawaii
    • Alaska
    • Guam
    • The Virgin Islands

    For More Information

    The best place to get more information regarding any FHA program or limits is directly through the FHA. Visit the official website or call a local office for more information.

FHA Mortgage Law Update