This week the Federal Housing Administration (FHA) has unveiled the latest loan limits for the calendar year 2024 concerning its Single Family Title II forward and Home Equity Conversion Mortgage (HECM) insurance programs. This move comes as a response to the sustained surge in home prices observed over the past year, prompting adjustments to loan limits for most regions across the country.
Julia Gordon, Assistant Secretary for Housing and Federal Housing Commissioner, emphasized the rationale behind these statutory loan limit increases. She pointed out that the adjustments are a reflection of the continuous upward trajectory in home prices nationwide throughout 2023. Gordon believes that these increases will empower homebuyers by providing them with access to FHA's low-down-payment financing options, particularly crucial at a time when affordability challenges could potentially exclude well-qualified borrowers from the housing market.
The calculation of FHA's annual loan limits is mandated by the National Housing Act, employing a formula outlined in the Housing and Economic Recovery Act of 2008 (HERA). This formula utilizes home sale data from counties or Metropolitan Statistical Areas (MSAs) to determine loan limits for three distinct cost categories specified by the law.
According to the National Housing Act, FHA is obligated to set Single Family forward mortgage loan limits at 115 percent of area median house prices for a specific jurisdiction, with a designated floor and ceiling. These limits are computed by MSA and county, in alignment with the national conforming loan limit established by the Federal Housing Finance Agency (FHFA) for conventional mortgages backed by Fannie Mae and Freddie Mac.
For the year 2024, the national conforming loan limit for a one-unit property is $766,550. FHA has set its minimum national loan limit floor at $498,257 for a one-unit property, equivalent to 65 percent of the national conforming loan limit. Areas where the median home price is less than this floor are subject to the established floor limit, while those exceeding it are considered high-cost areas, with FHA determining varying loan limits based on respective median home prices.
The National Housing Act mandates FHA to set the maximum loan limit ceiling for high-cost areas at $1,149,825, representing 150 percent of the national conforming loan limit. Special exception areas such as Alaska, Hawaii, Guam, and the U.S. Virgin Islands undergo further adjustments to account for elevated construction costs.
Furthermore, the FHA-insured HECM maximum claim amount is calculated at 150 percent of the Freddie Mac national conforming limit of $766,550. Notably, the HECM limit remains consistent across all locations, unaffected by variations in MSAs or counties.
For a comprehensive list of FHA loan limits, including areas at the FHA ceiling and those falling between the floor and the ceiling, interested parties can refer to FHA's dedicated FHA Loan Limits webpage. This valuable resource provides clarity on the specific limits applicable to different counties, aiding borrowers and industry professionals alike in navigating the evolving landscape of FHA-backed mortgages.
If you encounter any questions or uncertainties during your homebuying journey, be confident that Onshore Mortgage LLC is here to assist you. Our commitment revolves around providing tailored guidance and support, aiming to facilitate a smooth and well-informed experience at every stage of the process. Don't hesitate to contact us for any assistance you might require – we are here to help.
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