New FHA Loan Limits Help Account for Rising Home Prices

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Ninety-six percent of counties nationwide will start 2021 with higher Federal Housing Administration (FHA) loan limits than in 2020. Home price appreciation accelerated in 2020 – despite a pandemic – because the housing market was the surprise star of the year. Increasing FHA loan limits is especially important in a rising home price environment, as it helps some Americans get a mortgage by giving buyers lower down payment and credit score options. .

  • Homes priced below the FHA loan limit are selling for almost 2 to 1 compared to the ones above, according to Zonda data.
  • The FHA sets a ceiling and a floor for loan limits each year based on median home prices. The new cap of $ 822,375 is 7.4% higher than last year’s $ 765,600. Subways like Los Angeles, New York and San Francisco fall under this umbrella. The new $ 356,362 floor is seen in places like Tampa and Orlando, Florida, and Houston. Over 80% of all counties received the minimum limit.
  • Among the main markets, new loan limits increased the most in percentage terms in Boise, Idaho; Phoenix; and Salt Lake City, up 13%, 11% and 9%, respectively. The increase closely reflects the rise in prices in these local markets due to rapidly increasing demand.
  • Austin, Texas, one of the hottest real estate markets in the country, saw a slight increase of 2.8% in the loan limit starting in 2020 from $ 404,800 to $ 416,300.

“The COVID-19 pandemic has helped lift the housing market to its highest level for over a decade, and the resulting strength has been accompanied by rapid appreciation in house prices,” said Tim Sullivan , senior manager at Zonda. “The FHA loan limits were tied. increase to better reflect the market.

Maricopa County’s new home communities in Phoenix are the big winners under the new 2021 criteria, with another 50 falling under the updated limit of $ 368,000. Phoenix was also the biggest beneficiary last year when the FHA loan limit fell from $ 314,827 to $ 331,760. Houston, a market that has performed well despite the double whammy of COVID-19 and depressed oil prices, has 53 new home communities that now fall under the new limit of $ 356,362 in just two counties.

Other significant upper limit winners include major Riverside / San Bernardino counties, California; Orlando; and Charlotte, North Carolina.

The change in the FHA loan floor and ceiling limits corresponds to the 7.4% increase in conform loans announced by the Federal Housing Finance Agency (FHFA) at the end of last month. While the higher limits of both organizations have been slow to keep pace with the appreciation of home prices in recent years, the actions taken by the FHFA and FHA are positive for buyers looking to enter the home market. housing today using financing.

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