I received an email this week from a Senior Loan Officer informing me of a possible decrease to FHA funding limits if Congress fails to act.
The email read: “Barring Congressional action, FHA loan limits will revert back to loan limits determined under the Housing and Economic Recovery Act for loans insured after Oct 1, 2011.
In Washoe county this means that the base loan limit for FHA loans will decline from 403,750.00 to 325,450.00.
To read the entire report on the potential changes you can click on the link: http://portal.hud.gov/hudportal/documents/huddoc?id=fhaloanlmhera.pdf”
My initial reaction to reading this was “Uh oh, more downward pressure on home prices.” But what kind of impact will this really have?
I took a look at sales since the first of the year and found that 33 percent were financed via FHA loans. If we include VA loans in the mix, that number increases 38 percent of all sales. On the surface that appears to be a large segment of sales.
However, next I looked at all the sales that sold for more than $325,450 and that were finance via FHA loans. I found only 0.87 percent of sales since January 1st meeting those criteria. Including VA funded loans in the mix brought the proportion up to 1.1 percent.
In real numbers that 0.87 percent equates to 29 sales (since Jan. 1) that would not have occurred. That doesn’t seem like much of an impact. And, in actuality, perhaps some of these 29 sales might still have occurred by means of the home buyer simply increasing his or her down payment to the extent of making the loan amount conform to the lower FHA funding limit.
What are your thoughts on the effects of FHA loan limits reverting to $325,450? Am I looking at this too simplistically? Anything I’m missing. Would love to hear your thoughts.