California fha loan mortgage

MORTGAGES FHA loan limits raised for 2005

House prices continue to rise across the nation, so the U.S. Department of Housing and Urban Development has increased the Federal Housing Administration loan limits by nearly 8 percent to keep pace. Depending upon just where you live in the 48 contiguous states, the new HUD loan limits for single-family housing in 2005 range from $172,632 to $312,895. As we'll see later, the limits for Alaska and Hawaii, as well as for Guam and the Virgin Islands, are even higher.

These new figures are a 7.7 percent increase over the 2004 loan limits, which ranged from $160,176 in those regions of the nation where housing is the least expensive -- such as parts of Kansas, Oklahoma, and West Virginia -- to $290,319 in high-cost areas, such urban centers in New York, Illinois, and California. As an indication of just how much housing prices have risen in recent years, and why buying a house will likely be the best investment you ever make, it is worth noting that the 2005 limits are 42 percent higher than they were just five years ago, when they ranged from $121,296 to $219,849. Few stocks have increased their value by 42 percent over the past five years.

"These higher loan limits will help the FHA mortgage insurance program keep pace with the strong housing market while contributing to the Bush administration's commitment to create 5.5 million new minority homeowners by the end of the decade," explains HUD Secretary Alphonso Jackson.

Many people, especially those with low income, buy their first house with an FHA-backed loan because the requirements are often easier to meet. Buyers can usually have a higher debt-to-income ratio than would normally be allowed with a conventional loan. Lenders also tend to be a bit more lenient because they know the government is guaranteeing the loan.

For example, buyers can get into a house with only a 3 percent down payment, and they are allowed to get that down payment as a gift from a family member, friend, or as a grant from a non-profit housing agency or community organization. HUD also offers classes and counseling to help prepare first-time buyers for homeownership, and will work with homeowners who fall behind in their payments, as well. As a result, there are more than 5.2 million single-family FHA- backed home mortgages in the country today. Almost 80 percent of FHA loans go to first-time homebuyers. Of that 80 percent, roughly 37 percent are minority homebuyers.

HUD adjusts the loan limits every year to keep pace with housing prices across the nation. Federal law ties FHA limits to the conforming loan limits set each year by Fannie Mae and Freddie Mac. Their limit for a single-family home in 2005 is $359,650. Any loan for more than that is considered a jumbo loan, and carries a higher interest rate. Loan limits have also been raised for multifamily housing. For a two-unit dwelling the range is $220,992 to $400,548. For a three-family unit it's $267,120 to $484,155, and for a fourplex it's $331,968 to $601,692

Since housing is so much more expensive in Alaska, Hawaii, Guam and the Virgin Islands, federal law allows FHA-backed mortgages in those areas to be as much as 150 percent more than the FHA ceiling in the rest of the U.S. This makes those limits $469,342 for a single- family unit, $600,822 for a duplex, $726,232 for a triplex and $902,538 for a quad.

To find out what the FHA limits are for where you live, or for where you are thinking about moving, go to the FHA Mortgage Limits page at https://entp.hud.gov/idapp/html/hicostlook.cfm. Once there, you can type in the name of the state and county or counties you are interested in. Or, you can call the HUD consumer hotline at (800) 767- 4483.

Jackson points out that increased loan limits do not mean increased federal spending. People who get FHA-backed loans pay a premium, something similar to Private Mortgage Insurance, into the FHA Insurance Fund. This money is used to cover a lender's losses if the house has to be foreclosed and sold at a loss. In other words, the people who get FHA-backed loans basically support the program.

While low-income and minority families are the biggest beneficiaries of the increased limits, they also can help senior citizens who qualify for FHA-insured reverse mortgages. A reverse mortgage is a loan that lets people 62 or older use their homes as collateral to borrow money. They do not have to sell the house, give up title, or move out of it, and the loan is not paid back until the borrower sells the house, moves out for a year, or dies. At that point, the loan is repaid, with interest. Heirs may pay off the loan at that time and keep the house, or the house can be sold and the heirs will get whatever is left after the reverse mortgage is paid off.

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