Need an FHA Florida Home Loan? New Limit Will Help

Potential home owners struggling with payments and credit ratings received a gift for the holidays last week:

The Department of Housing and Urban Development increased the limit on government-insured mortgages in 2006 to $362,790 in the nation’s most expensive housing markets. The 2005 maximum had been $312,895.

The new ceiling on minimal downpayment loans insured by the Federal Housing Administration means that buyers with poor credit report numbers can borrow almost as much as those with perfect scores … without having to shop for financing in the subprime market where rates are substantially higher.

For those unaware, FHA mortages or loans are used primarily by first-time purchasers and minorities who have little or no cash for a down payment, typically the largest single impediment to home ownership.

Although the agency requires a minimum of 3 percent down, borrowers can use gift money to make up for any shortfall in their own funds. Moreover, sellers are permitted to cover closing costs up to 6 percent of the selling price.

More information on an FHA Florida home loan

By law, the FHA can back loans of up to 95 percent of any given county’s median house price. At the same time, however, the FHA maximum mortgage amount cannot exceed 87 percent of the limit placed on loans that can be purchased by Freddie Mac, nor can it be lower than 48 percent of the Freddie Mac ceiling.

As of Jan. 1, $417,000 is the new limit on Freddie Mac loans, which are reserved for only those borrowers who have the best credit profiles and represent the least risk to lenders.

In most of the country’s 3,000-plus jurisdictions, 95 percent of the median house price is less than 48 percent of the Freddie Mac limit, so the new FHA ceiling — also known as the “floor” — is $200,160. In 2005, the floor was $172,632.

However, in the 88 high-cost counties where 95 percent of the median exceeds the 87 percent maximum, the new FHA ceiling is $362,790. In 468 counties, the FHA loan limit is somewhere between the floor and the ceiling.

Although government-insured mortgages are considered riskier than those backed by private insurers, lenders are currently charging a lower rate, according to the latest figures published by HSH Associates, a Pompton Plains, N.J., mortgage information company.

Upfront fees on FHA loans are somewhat higher, including points and insurance premiums, but even lower-income borrowers who have been late on their credit card payments or other bills still can qualify.

The new FHA loan limits cover not only the government’s basic 203(b) loan program but also several other key initiatives, including mortgages for the following:

• Disaster victims
• Rehabilitation loans
• Loans on properties in declining areas
• Condominium mortgages
• Home equity conversion mortgages

This should all be welcome news for individuals that feared their poor credit history would get in the way of any Florida home loan deals. 2006 appears to bode well for even the most downtrodden of hopeful buyers.