Federally-insured Lloans

Buyers Will See Limit Hikes For 2018 FHA Loans

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Prospective buyers looking to purchase a Long Beach area home in 2018 will get more assistance from the government through higher limits on FHA loans and other federally-insured loans.

Fannie Mae, Freddie Mac and the Federal Housing Administration have annually increased their loan limits for the last several years to keep pace with the real estate market. The FHA is required by the National Housing Act, which was amended by the Housing and Recovery Act of 2008, to set single-family forward loan limits at 115% of median home prices.

FHA loans are popular among first-time homebuyers because they offer a down payment of 3.5 % and more flexible criteria than a conventional mortgage. The interest rates of an FHA loan are also lower than conventional mortgages.

These are the new FHA loan limits set to take effect on or after Jan. 1, 2018.

Single

Duplex

Tri-plex

Four-plex

$679,650

$870,225

$1,051,875

$1,307,175

Here are the FHA loan limits set to expire on Dec. 31, 2017

Single

Duplex

Tri-plex

Four-plex

$636,150

$814,500

$984,525

$1,223,475

This represents a limit increase of $43,500 for single-family home loans. Jason Thibodeau, a mortgage advisor with Alpine Mortgage Planning, said this is a larger bump, percentage-wise, than what homebuyers saw in 2017.

A potential homebuyer in 2018 with a $24,000 down payment can now seriously consider purchasing a $704,000 home.

“That’s probably the most significant piece of this,” Thibodeau said. “Your first-time homeowner in California has no way of saving the traditional 20% down payment.”

Federally-insured loan limits topped out at $729,000 before the  2008 housing market crash,” said Traci Stier, a loan consultant with loanDepot. The limits were then reduced to less than $630,000 to coincide with lower property values.

Steir said the limit increases slated for 2018 are reassuring.

“This seems like government verification that the housing market is back on the rise,” Stier said. “If people are worried about the market, this could indicate the opposite, that prices will actually continue to rise.”

While the limit increases may grow the buyer pool from what it would be otherwise, Thibodeau anticipates demand to be about the same in 2018.

“If you’re a first-time homeowner or a move-up buyer with kids the difference between a $600,000 and a $700,000 home is a school district you really want your children to attend,” he said.

Limits for conventional mortgages will also go up in 2018. Thibodeau said the rising stock market also drives investors to pull money  out of the bond market, which results in a rise in yields and rates for mortgages and treasuries.

The requirement to purchase  mortgage insurance for federally-insured loans dissuades some homebuyers from taking advantage of the program. But considering interest rates are incredibly low, a $250 monthly mortgage insurance payment for starter condo shouldn’t been seen as a deal killer.

“Don’t let that [mortgage insurance payment] rob you of the benefits of homeownership,” Thibodeau said.

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