The Department of
Housing and Urban Development (HUD) has published its 2021 Forward Mortgage
Limits for FHA loans. The FHA limits are based on the Federal Housing Finance Agency’s
(FHFA’s) conforming limits for Fannie Mae and Freddie Mac loans; however, they
are individualized by locality and cover a much wider range.

HUD sets a floor for the
lowest cost areas and a ceiling for high cost areas. Limits fall within those
two ranges. The agency determines whether an area is considered high cost or
low cost by the median sales price of homes at the county level. Where a
property is inside a Metropolitan Statistical Area (MSA)  the county within the MSA with the highest median
price determines the outcome for the entire MSA.

Last week FHFA (not to be confused with FHA) announced
it has raised its 2021 conforming limit by 7.42 percent based on that increase
in its House Price Index from the third quarter of 2019 to the same quarter in
2020. That resulted in a new conforming limit of $548,250. FHA uses that figure to compute its floor
and ceiling.

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