How do the new FHA loan limits affect League City Home Buyers

On March the FHA (Federal Housing Administration) increased it’s single family home loan limits from $200,160  to $271,050.  FHA provides mortgage insurance on FHA loan programs through their approved lenders. FHA is a quasi-government agency that is a part of HUD. FHA operates as a business generating enough income so that it does not have to rely on the government for income. The great thing about FHA loans is that people with low credit scores can get a 30 yr fixed mortgage with a market interest rate. Loan requirements for private banks are becoming stricter every day which will push more buyers towards FHA loans.

The FHA only requires a borrower to have 3% invested into the property. I have heard of many instances where borrowers had fico (credit) scores well below 600 and were still able to obtain financing. FHA does require no late payments or charge offs within the past year to two years on your credit report. FHA loans are great things for people trying to rebuild their credit or coming off a financial hardship. In the past FHA would require the appraiser to attest to the condition of the home. There were a number of things the appraiser had to certify were in good condition or working order.

Many appraisers felt uneasy about this and frequently called out things that were not real issues. Unfortunately the appraiser was the only party that made the decision. We would have appraiser stating that homes need painting or that the side walk is cracked. These items would be required to be corrected before the loan closed. All of those certifications are no longer required so a FHA loan is very similar to a conventional loan from a private bank. Higher loan limits will help home sellers because it will open up a new pool of buyers.  This increase is only temporary, but hopefully FHA will make it permanent.