Escrow Trust Advisors | FHA Loan Limits Set to Drop October 1st
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FHA Loan Limits Set to Drop October 1st

FHA Loan Limits Set to Drop October 1st

On October 1, the limit on loans that government controlled mortgage agencies, Fannie Mae and Freddie Mac, can guarantee will drop from $729,750 to a maximum of $625,500, unless Congress intervenes.   In September, lawmakers called for a short-term extension of regulations, hoping to allow the maximum size of loans to remain at its current level.

If the loan limit does drop, homebuyers will see higher down payments, higher mortgage rates, and stricter qualifications for loans.  Those who seek larger mortgages will have to apply for jumbo loans, which might include higher interest rates and down payments.

Loan limits determine what the maximum mortgage amount the FHA, Fannie, and Freddie can guarantee. Under the new loan limits, certain counties will see substantial drops in their loan limits.  Los Angeles Counties will drop by $104,250.  The California Association of REALTORS provides a full, county-by-county list of changes here

In addition, after October 1, mortgage loans higher than $625,500 will be considered a non-conforming jumbo loan.  Those loans usually have higher rates than conforming rates, depending on the product of the loan.  They typically also require a higher down payment.  There will also be tighter requirements. FHA loan requirements might allow for lower credit scores, and homebuyers may be able to obtain an FHA loan three years after defaulting or foreclosing.