A new bill introduced in the US House of Representatives is trying to increase the limits on FHA loans, making it easier for consumers in more expensive areas to purchase a home with FHA mortgage insurance.
The Federal Housing Administration, or FHA, insures mortgages and thus provides lenders with protection against losses as the result of homeowners defaulting on their loan. FHA insurance allows consumers who qualify to get a loan to purchase a home with very little cash investment and more flexible income and debt ratios than would normally be required. This gives many people who are unable to qualify for a conventional mortgage the opportunity to own their own home.
Currently, the FHA cannot insure a loan greater than $290,319, which is 87% of the conforming loan limit. In many places around the county, including New York and California, the median home price far exceeds this limit. The new bill, called the “FHA Single Family Loan Limit Adjustment Act of 2004,” would eliminate the current limit and allow FHA limits to increase to each local areas median home price.
You can find out more about the FHA at http://www.hud.gov/offices/hsg/fhahistory.cfm
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