Lew Sichelman is a seasoned writer with 50 years of covering the housing and mortgage markets under his belt. His biweekly Inman column publishes on Tuesdays.
On the heels of an increase in the conforming loan limits, the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) have rolled out new limits on the loan they started backing January 1, 2019.
The FHA’s new “floor” will be $314,827 for single-family homes in most of the nation’s 3,000-plus counties — almost a 7 percent jump from the current limit of $294,515. The new VA ceiling will be $484,350, up from $453,100.
In government parlance, the floor is actually the ceiling on the loan amount the FHA will insure. But in high cost markets, the FHA will boost the floor from the current $679,650 to $726,525 starting this year.
The floor will remain at the current level in 181 counties, however. And in 504 jurisdictions, it will be somewhere between $314,827 and $726,525. The floor was not lowered anywhere, the Department of Housing and Urban Development (HUD) said in a mortgagee letter announcing the changes.
To find out the new limits in your area, click here or here.
The VA limit of $484,350 applies to all but 199 higher-cost counties, where the lid will be higher. The VA has yet to specify how much higher, but the limit in those places are likely to follow the conforming loan limit.
The FHA also backs two- to four-unit properties, and its limits on loans on those units are somewhat higher – $403,125 for two-unit structures, $487,250 for those with three units and $605,525 for those with four units.
In high-cost counties, the limits on multi-unit properties will be higher still: $930,300 for two-unit buildings, $1,124,475 for those with three units and $1,397,400 for those with four units.
In addition, Uncle Sam has hiked the maximum claim amount for FHA-insured Home Equity Conversion Mortgages, or reverse mortgages. It will increase from $679,650 to $726,525 starting Jan.1 Because HECM limits do not vary from place to place, the new ceiling applies to all reverse mortgages no matter where the underlying property is located.
The FHA’s floor limits are tied to the Federal Housing Finance Agency’s increase in the conventional mortgage loan limits for 2019. In late November, the FHFA, the overseer and conservator of Fannie Mae and Freddie Mac, said they could purchase loans up to $484,350 starting Jan. 1, an increase of 6.9 percent from $453,100.
Under the National Housing Act, as amended by the Housing and Economic Recovery Act of 2008, the FHA is required to establish its floor and ceiling loan limits based on the loan limit set by FHFA for conventional mortgages owned or guaranteed by Fannie Mae and Freddie Mac. The new FHA floor is 65 percent of the new conforming limit.
At the same time, in high-cost areas, the FHA is mandated to set its maximum at 150 percent of the conforming limit.
VA does not set a cap on how much servicepeople can borrow. But its limit applies to the amount of liability it will assume should a borrower default, and that usually impacts how much the veteran or active duty personnel can borrow.
The VA limit, then, is the amount a vet can borrower without putting any money of his own into the transaction, provided he is income and credit qualified and the house appraises for at least the purchase price. A vet can borrower more, but for every $4 over the limit, he will have to put up $1 of his own money.
Lew Sichelman is a seasoned writer with 50 years of covering the housing and mortgage markets under his belt. His biweekly Inman column publishes on Tuesdays.
