Thanks to daytrip for sending in this story on FHA reducing loan limits:
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.
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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:
| Year | |||
| 2011 | |||
| 2012 | |||
| 2013 |
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.
Good riddance. May Fannie and Freddie follow.
Jim:
Long time reader; first time commenter. While I welcome the weaning and complete elimination of FHA backed loans, after perusing the FHA website for data on my current locale (Portland, OR), I was amazed to see the FHA backing multiplex loans. While probably not a huge percentage of the FHA loans issued (perhaps you have access to some concrete data), exactly why are we backing investor financing? Have you ever had any buyer’s utilize these multiplex FHA loans?
-97212
Is FHA the one that you pay PMI for the life of the loan even if you go below 20%?
Welcome 97212!
One of the 2-4 units still has to be owner-occupied, but I’m not sure how many actually move in. You can let your imagination run with that one
I haven’t seen anyone use an FHA loan for units, but in San Diego you can get up to a $1,341,350 mortgage for a fourplex.
Thanks for checking in – and how ’bout them Blazers!
@Thaylor
I don’t necessarily mind missing out on the latest rise in prices, but my biggest regret was not getting into ANYTHING with FHA financing back in 2010. The government was effectively begging you to buy a house then if you used an FHA loan.
You’re right about the PMI being for the life of the loan. However, I think you were able to re-finance out of it.