New 2009 FHA Limits

Starting January 1^st, 2009, the HUD (Housing and Urban Development) has set new permanent maximum loan limits for FHA (Federal Housing Administration) Mortgages and FHA Refinance Loans, as part of the Housing and Economic Recovery Act of 2008.

Under the Housing and Economic Recovery Act of 2008 (HERA), passed in July 2008, the Federal Housing Finance Agency (FHFA) was established and aimed to set loan limits annually. The rules governing how the loan limits are established differ from the rules set forth in the Economic Stimulus Act of 2008 (ESA), which applies to loans originated in 2008. Under ESA, loan limits for high-cost areas were set at 125% of local house price medians and the maximum high-cost limit was 175% of the national conforming limit ($729,750 in the continental U.S.).

Since March 6, 2008, the FHA limits was changed into a range between $271,050 – $729,750 depending on location and the size of the home. Previously the FHA loans limit was $362,790. This is a part of the stimulus package in 2008 (referred to as the “FHA Forward” program). The more flexible FHA loan limit applies differently depending on its location and house size. For example, in populous areas with high cost of living such as New York City and Los Angeles the FHA loan limit for single-family homes could increase to the full $729,750 while in smaller city such as Denver, the FHA home loans could be just $406,250.

Now, the national loan limit for single-family homes in the lower 48 states has been pegged to a house price index chosen by the FHFA. The national loan limit for 2009 will remain at $417,000. In future years, the mortgage limit for any given area shall be set at 115% of the median house price in that area, as determined by HUD, it neither can exceed 150% nor be lower than 65% of the Freddie Mac national loan limit (now it’s called the “Floor” and the “Ceiling”). Alaska, Hawaii, Guam and the USVI may be adjusted to 150% of these limits to account for higher costs.

The new FHA Mortgage limits for 2009 are detailed below:

In areas where 115% of the median house price is less than 65% of the Freddie Mac limit, the FHA limits are set at the 65% amount, (called the “Floor”) as follows:

-One-Unit $271,050

-Two-Unit $347,000

-Three-Unit $419,400

-Four-Unit $521,250

Meanwhile in places where loan limits exceed ‘the floor’ the mortgage limits are set at the 150% amount, (called the “Ceiling”) as follows:

-One-Unit $625,500

-Two-Unit $800,775

-Three-Unit $967,950

-Four-Unit $1,202,925

In areas where 115% of the median home price is in between ‘the floor’ and ‘the ceiling’ the limit shall be at 115% of the median home price. Now, seeing at this new FHA mortgage limits, it may be the best time for you to consider an FHA refinance loan or an FHA mortgage. But, the FHA has been proved to be a fantastic help for the people of America in time of the Fantastic Depression, so the assurance I could get (and tell) is: it has been proven before. Excellent luck!

Read also: FHA Financing and FHA Mortgage Calculator