From HW:

The Federal Housing Administration released approved loan limits on mortgages it would insure in 2011, leaving the ceiling unchanged at $729,750.

The Economic Stimulus Act of 2008 and the Housing and Economic Recovery Act of 2008 raised the FHA loan-limit ceiling to help stabilize a shaky housing market. The national floor remains unchanged as well at $271,050.

The limits apply to all mortgages originated between Jan. 1, 2011, and Sept. 30, 2011, or the fiscal year for the FHA.

With the mortgage insurance industry still in recovery mode, the FHA has seen its share of the market swell. In 2010, the FHA insured $319 billion in single-family mortgages, 40% of all purchase mortgages in 2010.

Some areas of Alaska, Hawaii, Guam and the Virgin Islands receive special exceptions to account for higher costs of construction. The FHA set the ceiling in these areas at $1,094,625 for 2011.

The FHA kept its loan limit unchanged for the Home Equity Conversion Mortgage program, or reverse mortgages. It remained at $625,500 even in special exception areas.


FHA Gifts

Buyers can still receive a gift for their down payment and closing costs:

  • In order to verify that gift funds come from a bona fide source, the FHA limits who can donate and imposes a paper trail requirement. For instance, sellers may not gift funds to the buyer via a charitable organization. Acceptable donors must provide documentation in the form of account statements and a gift letter, demonstrating that the funds belonged to them, and are not a loan to the buyer. The gift letter states the donor’s name, address, telephone, relationship to borrower and gift amount.
  • The donor is not limited in his source of gift funds. In general, the FHA is not concerned with where the donor got the money so long as they money did not come from a party to the transaction. Donors may borrow gift funds but must not obligate the borrower to pay the money back, according to the FHA Handbook.
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