FHA lending changes for 2014
A big change affecting the South Bay housing market is a Federal Housing Administration (FHA) has decreased the maximum loan amount for borrowers beginning Jan. 1, 2014.
The agency announced that its mortgages will be limited to a maximum of $625,500, down from $729,750. The South Bay has high-priced housing — about one in four homes in the region sells for $1,000,000 and above. The FHA’s new loan limit will match the caps for conventional loans purchased by Fannie Mae and Freddie Mac.
The FHA said in a statement that the agency wants to reduce the government’s role in mortgage lending to borrowers who are “underserved” — who either are low-income or have difficulty obtaining loans. The higher limits were put in as an emergency measure in 2008 and were supposed to last one year but were allowed to continue because of the lack of private loans.
Borrowers who need a loan of more than $625,500 will have to get a jumbo loan, which typically requires a down payment of at least 20 percent. FHA loans are not only a little more flexible in terms of their qualification guidelines, but, more important for many people, they require a down payment of just 3.5 percent.