Rising home prices continue to put stress on housing affordability (higher home prices mean higher loan payments). As home prices rise, it puts stress on affordable home loan products. As a result, the 2019 FHA loan limits have increased to keep up with the county median prices. When comparing 2018 & 2019, single-family residence FHA loan limits had an increase of $20,312. Increasing from $294,515 (2018 limit) to $314,827 is almost a 7% increase. The increase will offer more buyers and homeowners access to the affordability and flexible guidelines offered by FHA loan programs.
When to the 2019 FHA Loan Limits Start?
The Department of Housing and Urban Development announced the new FHA loan limits through Mortgagee Letter 18-11. It states these updates start with case files numbers assigned on or after January 1, 2019. In addition to the minimum FHA loan limit, the loan ceiling for high-cost counties is set at $726,525. That is an increase of $46,875! Finally, Home Equity Conversion Mortgage (HECM) claim limit increased to $726,525 as well.
2019 FHA Loan Limits
As the HUD limit announcement states, median home prices have increased. So, the response is to raise the limits. As shown in the chart below, loan limits are broken into houses with 1 – 4 units.
|Area||One Unit Limit||Two Unit Limit||Three Unit Limit||Four Unit Limit|
FHA Loan Advantages
FHA is one of the most popular home loan programs available. The reason is that it is a valuable tool for overcoming buyer hurdles such as down payment, credit, higher debt to income ratios, and more.
- 3.5% down payment
- Under 600 credit score possible
- $100 down payment for specific HUD owned properties
- Gift funds allowed
- Up to 55% or more debt to income ratio
- Stick built homes, manufactured homes, townhomes, and condos
- Nonoccupying co signors allowed
- Renovation options
Not only does FHA allow a down payment of 3.5% of the purchase price, but it also allows for the whole amount to be a documented gift. There’s even a special program available to some HUD owned foreclosure properties.
Another common issue includes buyers needing a little extra debt to income ratio for qualification. Often, the cause is student loan debt. Thus, FHA loan approvals often allow a 55% debt ratio and occasionally higher with compensating factors. Maybe that isn’t enough. FHA even allows for a related co-borrower to sign on the loan as well. Technically the occupying borrower doesn’t need to have an income. Therefore, the non-occupying co-borrower that doesn’t live in the home could use his/her income to cover the whole deal. It is important to remember that the co-borrower is just as responsible for the loan as the occupying borrower.
FHA 203k Renovation Loan
For many reasons, an FHA 203k is a great tool to fix up a property. First of all, it could open up possibilities while looking at homes. Some overlooked homes become opportunities for a buyer armed with a renovation loan. Just think of homes in need of a roof, crawl space repair, new flooring, windows, or siding. These items and more may be combined with the purchase price. Then, the same 3.5% minimum down payment of the total gives an excellent solution for many buyers.
Furthermore, current homeowners may use an FHA 203k to make home improvements. Because it uses the as-completed appraised value, homeowners may be able to finance improvements. Improvements for the two FHA renovation options may cover small cosmetic improvements to major renovations.