Federal Housing Administration Loan Limits Increased
In October, Congress decided to lower the top loan amount that the Federal Housing Administration (FHA) could back, but then at the end of last month, they decided to raise it again. This higher loan limit will be valid for the next two years and applies to the country’s priciest real estate markets. In October the limit was lowered to $625,500, and in November it was raised to $729,750.
The FHA backs home loans for home buyers who make a down payment of less than 3.5% of the cost of a home. Without federal backing, given the still-shaky real estate market, private lenders may be reluctant to lend large amounts of money. In New York City, one of the priciest real estate markets in the country, more than 1,500 loans were made in amounts between $625,500 and $729,750 last year. Without federal backing, many of those loans may have fallen through, which would be bad news for the real estate market.
This move shows that Congress recognizes that the housing market still needs help, at least in the short term.
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