HUD Issues Mortgagee Letter Addressing Lower Loan Limits for FHA Loans

Last Friday, HUD released Mortgagee Letter 11-29 announcing the maximum loan limits for FHA loans effective October 1, 2011 through December 31, 2011.  FHA loan amounts are set to be reduced effective October 1, 2011 and many who have a "high balance" or FHA jumbo loan may be "caught in gap" if they do not close in time.  

In the Seattle/King County area, FHA maximum loan amounts are set to be reduced from $567,500 to $506,000.  Kitsap County will see their maximum FHA loan limit drop to $307,000.  You can see an entire list of Washington Counties and the new FHA maximum loan amounts here.

The Mortgagee Letter does state that FHA to FHA refinances "may exceed new loan limits" which is a bit of good news for those who currently have a high balance FHA loan.  Here are some of HUD's requirements:

  • the new mortgage must be a refinance of an existing FHA-insured mortgage
  • the maximum loan amount of the new FHA mortgage, including all the fees, closing costs, mortgage insurance premiums, must not exceed the oroiginal principal amount of the existing FHA mortgage.  NOTE: if it does exceed the original principal balance, the borrower can provide cash to cover the difference.
  • the new mortgage may not have a term of more than 12 years in excess of the unexpired term of the existing FHA mortgage.
  • the new monthly payment must be less than the existing.

It appears that FHA to FHA refinances that are above the new loan limits do not have the same pressure as those who are planning on purchasng a home or refinancing a conventional loan to an FHA insured loan.  If you're in that boat, you need to paddle quick as the clock is ticking down for those loan amounts with barely over 30 days remaining and some lenders implementing their own cut-off times in advance of HUDs.

If you're interested in an FHA loan anywhere in Washington State, I'm happy to help you. I've been originating FHA mortgages for the past 11 years at Mortgage Master Service Corporation where we have our own in-house underwriters. 

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