The Federal Housing Administration is set to re-calibrate loan limits for the incoming year. Announced this month, this effort addresses the concern of increasing home prices affecting thousands of borrowers nationwide.
In the report released by FHA on December 1, the increases are set to impact 2,948 counties while 286 will sustain the same limits as in 2016. This new rule will take effect on January 1, 2017.
- $636,150 in 2017 from 2016’s $625,500 for high-cost counties
- $275,665 in 2017 from 2016’s $271,050 for low-cost counties
In Alaska, Guam, Hawaii, and the Virgin Islands, the FHA also adjusted loan limits to cater to the high cost of construction. The said locations will receive the following adjustments:
- $721,050 for one-unit homes
- $923,050 for two-unit homes
- $1,115,800 for three-unit homes
- $1,386,650 for four-unit homes
How loan amounts are determined
Changes in maximum loan limits affect the amount of home loan you can get through an FHA financing program. Note that approved loan amounts may still vary per transaction. The FHA loan limit is not the only thing that determines how much money you can get through an FHA home loan. The LTV or loan-to-value ratio of your property plays an important factor as well and how much you are willing to pay for the down payment.
LTV ratios vary according to a) the type of borrower b) the type of transaction ( purchase or refinance) c) the type of program, as well as d) the stage of construction.
In addition, the maximum loanable amount is determined by the lesser of the nationwide mortgage limit for the area or a percentage of the adjusted value – this being the lesser of the purchase price of the home, less the inducements to purchase or the Property Value.
The FHA mortgage limits are calculated according to the median prices of the homes.
If you are planning to purchase a home or refinance your current property, you may fall subject to the new rule. Ask your lender about its implications to your future mortgage plans.