The years spent getting over the housing crisis have been difficult for people who need to buy a home but do not have a lot of extra funds. First-time homebuyers and those trying to rebuild their financial lives after layoffs or foreclosures may fear that they will never be able to own a home of their own. The good news is that the Federal Housing Administration has made a few recent changes to loan terms that make it easier for many Americans to finally grab their own piece of the American dream.
Greater Loan-to-Value Financing
The biggest difference, and one that applies to all eligible applicants in the United States, is an increase in the maximum loan-to-value financing prospective homebuyers can get. Forbes reported that in December, FHA announced that the Federal National Mortgage Association, also known as Fannie Mae, will now insure loans with a 97 percent loan-to-value. This update is particularly valuable to potential homebuyers who do not currently own a home. They cannot leverage equity in an existing home to create a larger down payment. While this coverage is typically limited to first-time homebuyers, FHA now only requires that one applicant (if there are two or more) qualify as a first-time homebuyer. Those applicants also may obtain conventional financing if they choose.
In certain high-cost-of-living areas, the loan limits are going up. In December, the FHA expanded the maximum loans available in several regions throughout the country. For example, The Seattle Times noted that Washington state residents in King, Snohomish and Pierce counties may apply for FHA mortgages up to $517,500 on a single-family home. And, the Los Angeles Times reported that the federal government increased limits on an FHA loan in San Diego, Ventura, Monterey and Napa counties. These new limits range from $502,550 in Monterey County to $615,250 in Napa County, reflecting the rising home prices in these regions. The FHA announced that it would continue to raise limits as appropriate, based on average home values in these locations. Other high-cost areas in California already sit at the FHA's maximum loan limit of $625,500.
Even if you did not own a home, the housing crisis of the past several years likely affected your ability to buy or sell a home. With these changes for 2015, the FHA seeks to make buying a home easier for those who need a little extra help getting a good mortgage. And, these new loan terms may promote a better environment for all prospective homebuyers. If you're looking for an FHA loan, talk with a loan and financing company, such as Western Ohio Mortgage.