In response to rising home prices, the Federal Housing Administration (FHA) is raising the size limit on FHA-backed mortgages.
Specifically, the FHA is increasing the baseline or “floor” on loans it backs to $275,665 – up from $271,050. This is 65% of the national conforming loan limit of $424,100.
In high-cost areas, the national loan limit “ceiling” will increase to $636,150 from $625,500, the FHA says in a release.
Additionally, the maximum claim amount for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $636,150. This is 150% of the national conforming limit.
The changes will take effect on Jan. 1, 2017.
Due to the changes to the FHA’s “floor” and “ceiling” limits, the maximum loan limits for forward mortgages increased in 2,948 counties, while 286 counties saw no change. There were no areas with a decrease in the maximum loan limits for forward mortgages.
The FHA notes that its minimum national loan limit “floor” applies to those areas where 115% of the median home price is less than 65% of the national conforming loan limit.
A little over a week ago, the Federal Housing Finance Agency announced that it plans to increase the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac, come Jan. 1.
Specifically, FHFA is raising the maximum conforming loan limits for one-unit properties to $424,100, up from the current $417,000.
It will be the first increase in the baseline loan limit since 2006.