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New refinance limits set for FHA mortgages and FHA refinance loans.

By: Roberto Bell

Today, HUD announced its new, permanent maximum loan limits for FHA Mortgages and FHA Refinance Loans that will become effective on Janurary 1st, 2009. These new maximum loan limits have been set as part of The Housing and Economic Recovery Act of 2008 and will be permanent limits.

Under the Housing and Economic Recovery Act of 2008 (HERA) , which passed in July 2008, the Federal Housing Finance Agency (FHFA) was established and directed to set conforming loan limits each year. The policy governing how the mortgage limits are established clash from the policy set onward in the Economic Stimulus Act of 2008 (ESA), which applies to loans originated in 2008. For example, under ESA, mortgage limits for high-cost areas were set at 125 percent of Local house value medians and the greatest high-cost limit was 175 percent of the national conforming limit ($729,750 in the continental U.S.).

Starting January 1st, the nationalloan limit for one-unit homes in the lower 48 states shall be pegged to a house index chosen by the FHFA. The national loan limit for 2009 will remain at $417,000. In upcoming years, the fha mortgage limit for any given area shall be set at 115 percent of the mean house value in that area, as determined by HUD, except that the FHA mortgage cutoff in any given vicinity cannot exceed 150 percent of the Freddie Mac nationalmortgage limit, nor be lower than 65 percent of the Freddie Mac nationalmortgage limit.

This essentially creates the “Floor” and the “Ceiling” for the maximum FHA loan total for a given vicinity with the lowest maximum FHA mortgage amount being $271,050 in any area and the highest FHA mortgage amount being 625,500. Alaska, Hawaii, Guam and the USVI may be adjusted to 150% of these limits to account for higher costs.

The new FHA mortgage limits for 2009 are detailed below:

In areas where 115 percent of the mean house value is less than 65 percent of the Freddie Mac limit, the FHA limits are set at the 65 percent total, i.e., the “Floor,” as follows:

One-Unit $271,050
Two-Unit $347,000
Three-Unit $419,400
Four-Unit $521,250

Any area where the limits exceed the floor is known as a high costarea. In areas where 115 percent of the mean house value exceeds the 150 percent figure, the mortgage limits are set at the 150 percent total, i.e., the “Ceiling,” as follows:

One-Unit $625,500
Two-Unit $800,775
Three-Unit $967,950
Four-Unit $1,202,925

For all other areas, i.e., those where 115 percent of the mean home value for the area is in between the bottom and the ceiling, the limit shall be at 115 percent of the mean home value.

These new FHA loan limits could mean that the time might be right for you to ponder an FHA refinance loan or an FHA mortgage for your new home purchase. If you would like more information on FHA mortgage loans or FHA refinance loans, www.fha-101.com.