Each year limits are set on how much a conventional loan (non-government insured) can be and when a conventional loan exceeds the limit it is known as a jumbo loan. Government loans (FHA insured) also have a limit and when a loan exceeds that limit the FHA will not insure the loan and therefore it cannot be an FHA loan. Conventional and Government loan limits change every year. Generally the limits increase, but, new limits are set based on average home prices across the nation and home prices have typically gone up year over year which causes loan limits to increase as well. This past year, as we all know, housing prices have fallen all over the country and I just wanted to keep you abreast of how that will impact loan limits for the coming year.
As far as conventional loans are concerned the limits will remain unchanged at $417,000. This is good news since the limit could have decreased significantly in light of the drop in average home prices in 2008.
The FHA loan limit in our area (Oakland, Macomb and Wayne counties, Michigan) is dropping from $297,500 to $271,050. This is really important information if you are a pre-approved buyer and you’re looking at homes, plan to get an FHA loan and want to buy around $300,000. Your maximum loan amount has just declined. Hopefully the lender you are working with has made you aware of this! For you Realtors, if your buyers are using FHA and are in this price range you’ll want to make note of this too so you’re not looking at homes in a price range that the loan cannot be approved in.
Here’s to a vastly improved economy and housing market in 2009. Think positively and Happy New Year!
photo courtesy of Rev Dan Catt
Written by Ken Mascia
Prime Capital Mortgage, 248.644.1200
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