Mortgage

FHA's Dana Wade questions 2021 credit score limits

The head of federal housing administration questions the amount of credit limit hikes, stating that some of the consumers whose mortgages they insure should be in the non-government market.

The FHA's 2021 low-priced term credit limit for a single unit will be increased to $ 356,362, or 65% of the new compliant mortgage limit.

In high-cost areas, the new FHA limit is $ 822,375 for a single unit, or 150% of the 2021-compliant credit limit of $ 548,250. For compliant mortgages in high cost areas, the credit limit is also $ 822,375.

The current FHA low cost limit is $ 331,760 and the high cost limit is $ 765,000.

The new limit values ​​affect Federal Housing Commissioner Dana Wade.

"The FHA has steadily increased credit limits over the past few years, enabling it to service a segment of borrowers that the conventional market may well serve," Wade said in a press release. "The FHA's mission is to assist low- to middle-income borrowers. Why does the FHA law allow the FHA to insure mortgages up to $ 822,375? This is a question that Congress and the taxpayers behind the FHA are asking. have to answer. "

The calculation of the minimum amount, called the land, and the maximum amount or the ceiling is determined by federal law. The lower limit applies to districts in which 115% of the median home price is less than 65% of the corresponding credit limit. If prices are above this level, the FHA limit can increase up to the maximum amount.

As a result, there are districts where the new boundary is between the ceiling and the floor. Additionally, the FHA stated that there are 125 counties where credit limits will not change as of 2020 due to local fluctuations in home values. And unlike in 2019, no district will lower the credit limit.

These limits do not apply to mortgages for which the FHA offers insurance in two states, Alaska and Hawaii, as well as Guam and the US Virgin Islands. Due to the cost of construction in these areas, the new limit for a single unit is over $ 1.23 million.

The FHA also announced the new credit limit for its reverse mortgage program.

Since the FHA's regulations for the home conversion mortgage do not allow the limit to be varied, unlike the forward product, the nationwide maximum exposure limit is the same as the forward mortgage limit or $ 822,375.

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