As of Jan. 1, the limits for FHA-insured loans in the nation’s most expensive areas will be $625,500 for a single-unit dwelling, down from $729,500. The upper limits are for areas with the highest housing costs, including Los Angeles, Orange and Santa Barbara counties, the San Francisco Bay Area and Silicon Valley.
The limit varies for other areas. For example, Riverside and San Bernardino counties will top out at $355,350, San Diego County at $546,250 and Ventura County at $598,000.
The FHA historically provided insurance on smaller loans so first-time borrowers and people with modest incomes could get mortgages. Its role changed and Congress increased the limits in 2008 during the financial crisis, when home loans not backed by the government dried up.
More recently, banks have been eager to write jumbo mortgages for well-heeled borrowers without government support.
The reduction from $697,500 to $546,250 is a welcome relief for San Diego buyers. The FHA mortgage insurance is outrageous, and buyers are much better served getting a conventional or jumbo loan, even if it takes saving a while longer for a bigger down payment.
But what’s the current impact of FHA financing?
Here are the totals of FHA financed purchases of detached NSDCC homes in the 2nd and 3rd quarters, compared to the overall sales:
What has become the nation’s subprime loan was only used in 2% of the NSDCC purchases this year. With prices going in the opposite direction of their loan-limit, FHA loans should become extinct around here.