The Department of Housing and Urban Development recently announced changes to the FHA loan program that will take effect in 2016. These changes relate to loan limits, which are the maximum mortgage amounts for borrowers who use the FHA program. While most counties will have the same limits in 2016 as they did this year, 188 counties will see an increase next year.
Effective date: This change applies to all FHA loans with a case number assigned on or after January 1, 2016, and it will remain in effect through the end of that year.
Higher Home Prices Bring FHA Changes in 188 Counties
Generally, the FHA loan limit for a certain county is calculated at 115% of the median home price in the county. So when home prices rise significantly in a particular area, HUD increases the local loan limits as well.
But it doesn’t always work this way. In some areas, home prices rise marginally or not at all, resulting in a “carryover” situation with no changes to the FHA loan limits. This was the case for most U.S. counties when HUD reviewed home-price increases for 2015.
But in 188 counties, house values rose enough to justify an increase in loan limits. Those 188 counties can be found in the PDF (hyperlink) provided above, and also on FHAhandbook.com.
According to HUD officials: “Due to changes in housing prices, the maximum loan limits for forward mortgages increased in 188 counties.”
These FHA changes will affect approximately 40 metro areas and a few smaller cities. These are areas where home values rose significantly over the last year or so, enough to warrant higher maximum mortgage amounts.
Cities & Metro Areas With Higher Loan Limits in 2016
FHA loan limits were increased from 2015 to 2016 for about 43 cities and metro areas (and their surrounding counties). Here is a partial list of cities and metros that will have higher limits in 2016:
- Anchorage, AK
- Austin-Round Rock, TX
- Bend-Redmond, OR
- Bismarck, ND
- Boston-Cambridge, MA
- Boulder, CO
- Charleston, SC
- Charlotte-Concord, NC
- Crestview-Fort Walton Beach, FL
- Dallas / DFW, TX
- Denver-Aurora, CO
- Destin, FL
- Durango, CO
- Durham-Chapel Hill, NC
- Fort Collins, CO
- Greeley, CO
- Heber, UT
- Houston, TX
- Indianapolis-Carmel, IN
- Jackson, MS
- Jacksonville, FL
- Juneau, AK
- Louisville, KY
- Madison, WI
- Midland, TX
- Minneapolis-St. Paul, MN
- Missoula, MT
- Napa, CA
- Nashville, TN
- Portland, OR
- Provo, UT
- Raleigh, NC
- Riverside-San Bernardino, CA
- Salinas, CA
- Salt Lake City, UT
- San Diego, CA
- Santa Rosa, CA
- Seattle, WA
- Springs, WY
- St. George, UT
- Stockton-Lodi, CA
- The Villages, FL
- Tuscaloosa, AL
Notes: In the list above, we have used the simplified name of some metro areas. For instance, instead of referring to the “Nashville-Davidson-Murfreesboro” metro area, we have simply labeled it as “Nashville.” This is not an official list. For the complete list of 188 counties with FHA changes in 2016, see the HUD document hyperlinked at the top of this article.
No Other Major Changes on the Horizon, for Now
The Department of Housing and Urban Development frequently makes changes to the FHA loan program. But most of their changes are administrative in nature (such as reporting and filing procedures).
We have no indication that HUD will make any major FHA changes during the first part of 2016. Typically, such events are announced well in advance to allow for a public comment period.
So for the most part, the FHA program in 2016 will look much like it did in 2015:
- Borrowers still have to make a minimum down payment of 3.5%.
- Borrowers still have to pay upfront and annual mortgage insurance premiums.
- Borrowers still have to apply through a HUD-approved mortgage lender.
- Borrowers still need to have decent credit to get approved for the program.
Changes to the FHA loan program are typically announced in the form of a Mortgagee Letter and are published on the HUD.gov website. A total of 29 letters were issued during calendar year 2015 (as of December 13). The two most recent policy letters, Mortgagee Letters 15-29 and 15-30, had to do with the above-mentioned FHA loan limit increases.