The Department of Housing and Urban Development (HUD) announced today that the FHA loan limits for the current year will carry over into 2015 as well. They will not be lowered, as they were last year, but will instead remain at current levels through December 2015.
HUD made the announcement earlier today in the form of a press release and policy letter sent to lenders.
According to the news release issued today:
“FHA’s calculation for maximum loan limits in high-cost metropolitan areas of the country will remain the same as the 2014 level of $625,500. The current standard loan limit for areas where housing costs are relatively low will also remain unchanged at $271,050.”
At the end of each year, the Federal Housing Administration (FHA) revises the national loan limit assigned to FHA-insured home loans. They create their limits by using a percentage of the national conforming loan amount, which is established by the Federal Housing Finance Agency and applied through Fannie Mae and Freddie Mac. FHA typically sets their “floor” at 65% of the conforming limit.
In areas with higher median home prices, loans are allowed to exceed the floor. These counties are appropriately labeled as “high-cost areas.” In these housing markets, borrowers can obtain FHA loan financing in amounts up to 150% of the conforming limit.
2015 FHA Loan Limits Range from $271,050 – $625,500
According to current HUD guidelines, the minimum FHA loan limit “floor” for a one-unit residential property is $271,050 (65% of conforming). The maximum “ceiling” for high-cost areas is $625,500, equal to 150% of conforming.
This policy change (or lack thereof) was implemented with the publication of HUD Mortgagee Letter 2014-25, on December 5, 2014. The limits stated above will apply to FHA-insured home loans with case numbers assigned on or after January 1, 2015. This policy will remain in place through the end of next year, at which time the caps could be recalculated upward or downward.
The loan limits for FHA’s reverse mortgage product, known as the Home Equity Conversion Mortgage (HECM), will also remain unchanged in 2015.
To learn more about this loan program, read our recent update on HUD requirements.
Status Quo the Name of the Game?
Loan limits are not the only feature staying the same for 2015. HUD also plans to maintain their current requirements for down payments through 2015. Current credit score and debt ratio guidelines also appear to be carrying over to next year. Additionally, there have been no forthcoming changes announced for the mortgage insurance premiums assigned to all FHA loans.
This “status quo” is noteworthy, because HUD has made numerous changes to their loan program over the last few years. Most of the changes were designed to shore up the agency’s capital reserve fund and prevent future losses resulting from bad loans.
One thing is certain: First-time home buyers with limited funds will continue to flock to the FHA loan program, with its relatively small 3.5% down-payment requirement.
Coming Soon: FHA Single-Family Housing Policy Handbook 4000.1
In an effort to clarify its rules and policies, HUD has created a new handbook for mortgage lenders and borrowers. It explains the minimum guidelines and criteria for FHA loans.
The new handbook — the “Single Family Housing Policy Handbook 4000.1” — is currently available in draft form on the HUD.gov website. It will eventually replace HUD Handbook 4155.1, which has long been the go-to source for program guidelines.
The 2015 FHA loan limits will soon be added to the Single Family Housing Policy Handbook.