FHA Loan Limits May be Going Down. So What?

You may have been hearing lately that FHA loan limits in certain counties will be decreasing starting October 1. Currently in Stanislaus County the largest FHA loan a borrower can get on a residential 1-4 unit property is $423,750. Given our decline in values that amount of money can get you a pretty darn nice house. If the limits are allowed to go down, however Stanislaus County's limit will decrease to $276,000 which is nearly a $150,000 decrease.

You may be wondering how this is relevant. It is in fact entirely relevant to everyone, so keep reading. 

Not only does FHA lend money to first time buyers, they make the loans accessible to people who do not have a ten to twenty percent down payment or do not otherwise qualify for conventional financing.

You are not one of those buyers? OK, fine. But what if you are selling a house though at the higher end of the limit? Obviously you want your house available to as many buyers as possible. The conclusion is simple: 

Lower FHA limits = fewer buyers who can purchase your home

Or, let's say you are on the cusp of the limit. Your house on paper is worth $295,000. You might have to reduce your price to fit into the guidelines to entice buyers, which is certainly not going to do any favors for values in your neighborhood or your wallet.

It is essential as we emerge from this massive real estate mess we have gotten ourselves in we do not stifle the growth we so desperately need. There are still a lot of foreclosures- even though many have not hit the open market yet. Government moratoriums on foreclosures are only putting a finger in the crack in the dam, so to speak. The homes are out there- and they cannot stay hidden in the shadows forever. Limiting the purchasing power of buyers is not the key to reestablishing a stable real estate market and economy.

I urge you to click HERE and fill out a short form that will send a message to our elected representatives to vote to extend our current, higher FHA loan limits. It only takes a minute and it could save you thousands.