The Federal Housing Administration (also referred to as FHA) updates their mortgage limits every year. Buyers should be familiar with what they are and when they can change. Below is some useful information on new limits for FHA mortgages in MA.
What Are FHA Mortgage Limits
Mortgage limits are the highest permitted mortgage amounts for an FHA mortgage. The mortgage amount is less than the purchase price. For example, if you buy a home for $ 400,000.00
and are giving a 3.5 percent down payment, then the mortgage amount comes out to $ 386,000.00
How Are FHA Mortgage Limits Computed
FHA mortgage limits vary by state and city. Median home sale prices are analyzed against limits for national conforming mortgages. Conforming mortgages are those that comply with Fannie Mae and Freddie Mac guidelines and can be sold to secondary mortgage markets. FHA takes 65 percent of the limit for conforming mortgages to set their floor for low end areas. Low end areas are communities where 115% of the median real estate value is less than 65% of the conforming mortgage limit. For higher priced areas, it can reach 150% of the limit for national conforming mortgages. These areas are those where 115% of the median real estate value is higher than 150% of limits for national conforming mortgages.
New Limits For FHA Mortgages In MA
In low end areas, the mortgage limit is $271,050. Mortgage limits for high end regions is $625,500. Thus, in no area will it go below $271,500 or be more than $625,500. Both the low and high limits match last year's figures, but many areas are somewhere in between and will see a difference for this year. Additionally, there are adjustments for single family versus multi-family properties. Specific figures are available at https://entp.hud.gov/idapp/html/hicostlook.cfm.
Importance of New Limits For FHA Mortgages In MA
It is very important to know the max purchase price throughout the real estate process. Selecting a home above the max will require you to put a larger down payment or require you to change to another mortgage program. For example, if the mortgage limit is $ 290,000.00
and you have a 3.5 percent down payment, then your maximum purchase price is $ 300,518.13
. Purchasing a property for $ 306,528.50
results in a $ 6,010.36
gap. The buyer must provide this money. If you are a cash sensitive borrower, this can prevent the transaction from happening. Don't forget that the maximum home price may not be identical for every town that you are considering. It is a good idea to know what they are during offer negotiations.