On October 1st, 2011 FHA will be lowering their maximum loan limits throughout the United States. Why? Because the current loan limits are no longer relevant in our current real estate market. Housing prices have been in a steep decline since 2008, and although stabalizing somewhat in specific markets around the country they are still declining in others.
How will this affect you, as a consumer? If you are a buyer you will be more limited in what you can buy using the 3.5% down payment guideline of FHA. If you are a seller, your home may become out of reach for that FHA buyer come Oct. 1st, 2011. For example, if you live in Maricopa County the loan limit will be reduced from $346,250 (current) to $271,050 (as of Oct. 1st). If you live in Coconino County the loan limit will go from $450,000 to $333,500. As you can see, these reductions are significant.
How will this affect overall sales? Probably not much. According to ARMLS (the greater phoenix MLS) less than 5% of all FHA sales between Jan. 1st, 2011 and May 31st, 2011 were greater than what the new loan limit will allow. In the greater Flagstaff area less than 20% of all sales (regardless of the financing mechanism) were greater than $333,500 between Jan, 1st and August 9th. So, realistically only a small percentage of transactions will be affected....but, it will have somewhat of an impact.
If you are considering purchasing a home via FHA, and you might be more interested in a home that would exceed the new guidelines, you should contact your real estate agent and your loan officer sooner than later. If you are selling a home that might exceed the new limits, and you want to attract any qualified buyer, you might want to talk with your listing agent right now about a strategy that would get your home sold before the new loan limits take affect.
If you are wondering what that information is at the very top of this blog, it pertains to that one question that all buyers want to know once they have applied for a mortgage loan. Should I lock in my rate, or should I "float"? The information at the top is some general lock advice provided to me by one of the loan officers I refer clients to.