The reduction in loan amounts will affect borrowers across Massachusetts and New Hampshire, where median home prices here tend to be higher than the national average.
This not only means home buyers will not be able to borrow as much as they were able to, but some may not be able to get qualified for these higher loan amounts.
The change will have the biggest effect in Worcester County, where loan limits are going from $380,000 to $285,000, a difference of $95,000. Buyers who were pre-approved for the higher amounts will have to go back to their lender to get pre-approved for these lower amounts or consider another loan program. And they also may have to look at homes in a different price range.
The higher loan limits that have been in place were made in an effort to make up for the lack of bank lending during the housing crisis in 2008. Due to continuing strains in credit markets, Congress delayed implementation of reducing loan limits several times. But now that the housing market is showing signs of recovery, FHA Commissioner Carol Galante says lowering limits “is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved.”
This should not have a major effect on the housing market, as FHA loans as a whole are being used less and less because they are getting more expensive.
Here is a chart of the new FHA loan limits for single-family homes:
The loan limits will go into effect January 1, 2014 through December 31, 2014.
To learn more about these loans, visit the FHA Loan page.