FHA = 40% of Purchase Loans

by | Dec 3, 2010 | Interest Rates/Loan Limits | 9 comments

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.

    • 9 Comments

    1. Josie
      Josie on December 3, 2010 at 1:17 pm

      If one does an FHA loan when purchasing a home, do you know if the buyer is required to be in the home a certain period of time before they can sell? Are there requirements, such as how long they must keep the FHA loan before they can re-fi?

    2. Deb
      Deb on December 3, 2010 at 1:23 pm

      Off topic, but check out this UT article:

      http://www.signonsandiego.com/news/2010/dec/03/pending-sales-drop-san-diego-rise-nationally/

      My favorite quote:
      Molly Kirkland, spokeswoman for the local association, said it isn’t clear why San Diego is going in the opposite direction.

      “They’ve been fluctuating this year,” she said. “I can’t say why they’re coming down.”

      How about, prices are too high, same old dogs on the market, unemployment is very high, wages are stagnant, the list goes on. She seems a tad bit out of touch or am I overly critical?

    3. Troubled Loner
      Troubled Loner on December 3, 2010 at 2:10 pm

      You’re not being overly critical Deb. With the exception of Jim and a few others, I’m very unimpressed with the level of intelligence and competence that I see in the real estate industry. I think most are too lazy to put in the time to figure out what’s going on; they just parrot what their associations say.

    4. Art Eclectic
      Art Eclectic on December 3, 2010 at 2:26 pm

      Troubled Loner – “It is difficult to get a man to understand something when his job depends on not understanding it.” — Upton Sinclair

      All those people who don’t understand have big money riding on NOT understanding. After all, housing prices are going to come back aaaannnyyyytime now and they’re all going to be swimming in cash.

      Applies to sellers, too.

    5. Kwaping
      Kwaping on December 3, 2010 at 3:05 pm

      Josie, I have a FHA loan and I am required to stay in the home two years as an owner-occupier. We refinanced to a lower rate almost immediately after getting our first loan, as it was substantially less.

    6. joe
      joe on December 3, 2010 at 3:20 pm

      So we have a bankrupt agency giving 40% of loans?

    8. Josie
      Josie on December 3, 2010 at 4:02 pm

      Thank you, Kwaping. I thought it requires one to stay for 2 years. At least the 40% of home buyers doing FHA aren’t going to flip for a while. I was curious if they are allowed to re-fi or if there’s pre-payment penalties or not allowed to for a certain period of time. That’s good that they allow you to re-fi if rates go down.

    9. clearfund
      clearfund on December 3, 2010 at 4:24 pm

      mojo – I know he had been looking in Del Mar since at least 2006. Who knows how many agents he rolled through before this rep hooked him in.

    Pin It on Pinterest