FHA to drop upper mortgage limits January 1, 2014December 11, 2013
The U.S. Department of Housing and Urban Development will be reducing the amount of loans for high cost areas of the country.
Beginning on January 1, 2014 all FHA loans will be capped in high cost areas at $625,500, reduced from the current cap of $729,750. FHA will keep its current loan limits in place in areas where housing costs are lower than $271,050. The new loan limit for the highest cost areas will affect about 650 counties, according to the Department of Housing and Urban Development.
FHA insures loans for buyers with down payments as low as 3.5 percent. The agency raised its limits during the financial crisis to help more home buyers, and the program quadrupled as a result. However, it faced mounting defaults and losses.