By Kevin Chiu
Jumbo loan limits, eliminated just two months ago have been increased by the Federal Housing Administration. The move raised loan limits to 125% of local median home prices to a maximum of $729,750.
The FHA jumbo loan increase was approved by Congress, and is expected to be signed by President Barack Obama. The floor will remain at $271,050 for FHA mortgages, while Freddie Mac and Fannie Mae loan amounts will remain at a maximum of $625,500. The increased loan limits will also be extended through 2013 under the program.
“The reinstated loan limits will help provide much needed liquidity and stability to communities nationwide as tight credit restrictions continue to prevent some qualified buyers from becoming home owners,” said National Association of Realtors President Moe Veissi.
The increased loan limits will help make mortgages more affordable and accessible for middle-class families throughout the U.S., according to the NAR. Studies show that nearly two-thirds of buyers who will be helped by the loan limits have incomes below $100,000.
“Restoring the higher FHA loan limits will help to stabilize home values,” said Home Builders Association chairman Bob Nielsen, “provide constancy while private investors re-enter the market, and enable millions of creditworthy consumers to get home loans with the best mortgage rates and lowest fees and down payment requirements.”
FHA mortgages are offered with as little as 3.5% down payments. The increase may also allow more homeowners to refinance mortgages at lower rates under the newly revamped Home Affordable Modification Program (HAMP). The Obama administration program has no limits on the loan-to-value a home may be refinanced at as long as mortgage holders meet other lending criteria.
The increase was approved by a bi-partisan vote of Congress after haggling over a series of issues proposed as part of the legislation, including a reduction on the percentage of home mortgages purchased by Freddie Mac and Fannie Mae over a ten year period. Changes at the giant government backed lenders, however, are expected to take years to implement, as lawmakers grapple with the agencies growing deficits.