Revisiting FHA – Increased Loan Limits for 2016

December 10, 2015

2000px-US-FederalHousingAdmin-Logo.svgYesterday, FHA announced the increase of their loan limits beginning on January 1, 2016 to $437,000 for single family residences in the following Tennessee counties: Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Maury, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, and Wilson.  The increase of the FHA loan limits will likely enable increased home-ownership opportunities in these 14 Tennessee counties for many reasons – some of which might be overlooked by the casual observer.

The obvious additional opportunities for those desiring to buy or refinance houses is possibly obvious.  Now home buyers wanting to buy a house up to $452,000 can do so with only a 3.5% down payment!  Buying a $452,000 anywhere in these counties with only a $15,800 down payment is an amazing option for many to consider.  This down payment can come as a gift from a family member and all of the closing costs for this purchase can be paid by the seller or the lender.  This arrangement can be a life-changing opportunity for many who have desire to live in an area where the safety, convenience or educational benefits could reap returns for many generations to come.

Happy Family

Many growing families may find the increased FHA Loan Limits in 2016 to be a lifesaver when considering their need for additional space, improved local schools or safer neighborhoods.

Others many need to refinance their homes or consolidate 1st and 2nd mortgages or other overwhelming debts and need the benefit of refinancing their home with an FHA loan up to 85% of the appraised value.  A borrower using an FHA loan to refinance their home is allowed to draw out this cash with no questions asked for paying off these high payment debt accounts or for making home improvements to their existing house.  The $11,500 increase in the FHA loan limit on January 1 might give those in need the extra breathing room to cause this new refinance loan to make sense for them to accomplish these financial goals to set them up for success for decades to come.

And finally, what many may not be aware of, the uniqueness of FHA underwriting guidelines may allow many who desire to buy or refinance to move forward with their new loan for any of these reasons:

  1. FHA allows for a “non-occupying, co-borrower” to be added to the loan where those who are planning to live in the house might not qualify on their own merits.  Lenders can add a parent, sibling, child, grandparent, aunt, uncle or cousin to the loan application and include their income, assets and credit profile to strengthen the quality of the loan to increase the possibility of loan approval.
  2. FHA allows for financing of mixed-use properties with residential interest rates and guidelines.  This would give a buyer the opportunity to purchase a property designed for use as a business AND a residence to purchase the entire property using FHA qualifying guidelines and still use part of the house for business use.
  3. FHA allows for property owners and home buyers to buy or refinance their homes setting aside additional money for repairs, upgrades, remodeling and rebuilding of the house – all in one loan.  This renovation loan called the FHA 203K is an amazing loan which enables home buyers to buy a distressed house and make it a dream house with all of the features that the new home buyer needs to make this home an investment they will enjoy for decades to come and to improve the entire neighborhood.

FHA loan increases on January 1, 2016 may seem like something that only mortgage geeks like this author might get excited about when really other industry partners and home owners and future home buyers should also welcome as we ring in the New Year!

(Please contact this author for additional details about any of the uses of the FHA Mortgage and how it might be of help to you or those you know.)

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HUD Proposes Lowering FHA Loan Limits in Middle Tennessee

May 31, 2011

Last Thursday, just before the long Memorial Day weekend marking the beginning of the 2011 summer, the US Department of Housing and Urban Development (HUD) released a 23 page proposal outlining loan limit decreases in 669 US counties – 13 of them in Tennessee and all of these located in middle Tennessee. 

Unless Congress prohibits these proposals, beginning October 1, 2011, each of these 13 counties, including Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, Wilson, will see their maximum FHA loan limit decrease $39,200 to a new lower maximum FHA loan limit of $393,300. 

Counties Affected by Possible Decrease in FHA Loan Limits for Loans

The current FHA maximum loan limit in these 13 counties was set at $432,500 in 2008 as a part of the Housing and Economic and Recovery Act during the waning days of the Bush administration in an attempt to stabilize the fragile housing and credit industries. 

This 9% decrease in FHA maximum loan limits in middle Tennessee will affect less than .5% of all of the FHA loans being originated in these middle Tennessee counties.  HUD decision to lower these maximum loan limits is an attempt to ward off the Republican critics in the US House of Representatives who are proposing changes to the FHA mortgage insurance program to limit the expansion of the risk of taxpayer supported programs in hope that private players and investors will re-enter the mortgage industry to replace what the Federal Government discontinues subsidizing.

Last year 32,126 FHA loans were closed in these 13 middle Tennessee counties and the new decrease in loan limits would have affected 138 of those transactions.  The argument could be made that Tennesseans borrowing more than $393,300 to buy or refinance a house would have been able to use other loan programs or that other non-government programs would be developed if FHA would move out of this particular high-end market.  Statistically, these higher-end mortgages have preformed much better than the lower-end mortgages but HUD would argue that these loans are not part of their stated mission to target “lower and middle-income borrowers” when they are using taxpayer money to operate a program insuring home mortgages at more than 150% higher than the Area Median House Price.

What is the expected outcome of such a move if Congress does not block these proposals for home buyers in Tennessee? 

Minimal.  Most first-time home buyers or home buyers with a scarred credit profile are not buying homes $400,000+ homes with only a 3.5% down payment as currently required by HUD for FHA insured loans. 

The initial potential panic caused by news reports of such proposals may cause a handful of buyers to get off the fence to get approved for their high-end FHA insured mortgage in order to beat the October 1, 2011 deadline but because so few Tennesseans will be affected by this proposal, only 138 in 2010, the Tennessee Congressional Delegation would likely not support any legislation thwarting efforts by HUD to continue to solidify the government supported mortgage insurance program – especially if these changes will affect only a few wealthy Tennessee home buyers.