The New FHA Loan limits does impact the middle class. Many consumers have recently faced higher rates or have been forced to put down larger downpayments due to a change to the way loans are classified. In some areas, the maximum size of a loan that can be financed by the FHA was reduced, forcing some borrowers to make larger downpayments. The minimum size for jumbo loans (i.e., loans not eligible for FHA, Fannie Mae, or Freddie Mac financing) may also have been lowered forcing many prospective buyers to increase their downpayments and/or pay higher mortgage rates.
- To attain a better understanding of the borrowers impacted by the reduction of the conforming loan limits in high cost areas, NAR Researched looked at FHA purchase originations data reported for the portion of 2011 prior to the change in the loan limits (e.g. January 1st through September 30th).
- Data from FHA’s Single Family Snapshot (loan amount, product type, and contract rate) were coupled with assumptions about the amortization period, debt-to-income ratio as well as insurance and taxes (30 years, 28%, and 1.5%, respectively) to estimate the household incomes of affected borrowers.
- The vast majority of borrowers, 85%, who used a loan above the new conforming limits prior to October 1st, had a household income below $150,000
- “Impact of New Conforming Loan Limits” survey, click here
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