Back in the Spring when the economy was bad but not quite in meltdown stage yet the Congress passed a housing bill that raised FHA loan limits in the MD Suburbs of DC area to $729,750 from their previous limit of $369,900.  That was a good thing.  It was also temporary.  The new limit was set to expire on December 31, 2008.

The Good News

The good news about FHA backed mortgages is that the limits are being reduced to $625,500 in the MD Suburbs of DC. Limits vary from location to location but in this area we’re good for the top limit. The new top loan amount is good for the foreseeable future. This is a huge plus for our area because homes prices are still pretty high and since the mortgages are backed by the US Government there are lots of mortgage compainies that are willing to lend money to people who qualify for them.

The other great part about FHA mortgages is that the qualification standards are significantly more relaxed than conventional mortgages.  That’s a good thing for first time home buyers, buyers with less than perfect credit, buyers who may need a co-signer that will not be living in the home (such as a parent or other family member that wants to help but won’t be living in the house), gifts from family members are still allowable for the down payment.  Here is a full run down of the FHA guidelines for lending.

Speaking of Down Payments

Part of the bad news is that the down payment required for FHA 203(b) loans - the regular type - is increasing from 3% to 3.5%. Thius means that home buyers will need to come up with more cash to make a home purchase or get someone to provide them with a gift to help out. However, the FHA 203(k) which is the loan used to help renovate homes that need repairs - think “short sales” and foreclosures - will still have the old down payment requirement.  So it actually makes the FHA 203(k) an even more attractive option when buying a home.

The Bottom Line

So the good news is that FHA loan limits remain high enough to be able to use FHA mortgages for most homes int the MD Suburbs of DC. More good news is that the FHA 203(k) and FHA 203(k) Streamlined mortgage products will stay at the old down payment requirement. The not-so-good news is that the down payment requirement for the regular “plain vanilla” FHA mortgage with increse from 3% to 3.5%

FHA is still one of the best ways to home ownership around, though.