HUD Announces Higher FHA Home Loan Limits

Effective January 1, 2005, FHA will insure single-family home mortgages up to $172,632 in low cost areas and up to $312,895 in high cost areas. The loan limits for two-, three- and four-unit dwellings also increased. The FHA is sending letters to thousands of mortgage lenders and brokers to make them aware of the higher rates that can help families.

Last year, the loan limits were $160,176 in low cost areas and $290,319 in high cost areas. Five years ago, the limits ranged from just $121,296 to $219,849. These levels were below the cost of many homes in many communities. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process.

Low-income and first time homebuyers are attracted to FHA-insured loans because the agency requires only a three-percent down payment.

The new loan limits are part of an annual adjustment HUD makes to account for rising home prices. Under federal law, loan limits are tied to the conforming loan limits of Freddie Mac and Fannie Mae, federally chartered corporations that buy and package mortgages.