Mortgage Loan Limits 2014

It's hard to believe another year is coming to a close. The year 2013 turned out to be a pretty excellent year for real estate in Michigan!

Every year Fannie Mae (FNMA), Freddie Mac (FHLMC), FHA and VA all adjust their loan limits. These limits are the maximum loan amount for a specific loan program. FNMA and FHLMC control the Conventional Loan limit. Conventional loans are your standard plain vanilla mortgage loan and include fixed and adjustable rate loans with loan terms between 10 and 30 years. The Fannie / Freddie loan limit has been set at $417,000 for the past several years. Loans over $417,000 are Jumbo Loans and generally involve a higher interest rate, larger down payment and more strict underwriting guidelines. For 2014 the Conventional Loan limit will remain unchanged at $417,000.

VA loans have long held to the standard of limiting loan amounts to the Conventional Loan Limit (except in certain high cost areas where the limit may be higher). The VA loan limit will remain unchanged in Michigan and is set at $417,000.

The FHA loan limits vary all over the country and are based on average home values in a specific area. FHA increases or decreases the loan limit based on changes to home values over the past year. When home values rise so do loan limits. Conversely, if home values fall then loan limits would go down as well. FHA, in an effort to help support the housing recovery, has allowed loan limits to remain constant over the past 5 years even in the face of falling values. This year that is coming to an end. For Oakland, Macomb and Wayne County, Michigan the FHA loan limit will fall to $271,050 for 2014. Previously the FHA loan could go as high as $297,500 so this is a significant drop and will impact an FHA borrower's purchasing power. Please note that if a home buyer has an accepted offer, makes a loan application and the lender gets the FHA case number prior to December 31st then the loan amount can be up to the 2013 loan limit and will not be subject to the reduction.

So, if you are an FHA buyer and want to purchase a home around $300,000 then get out there and try to find a house to buy before Christmas!

Ken Mascia, Licensed Loan Officer NMLS 135323
(248) 644-1200, ext 15

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FHA Back to Work Program

Recently HUD announced a change to the FHA loan program with the idea in mind to assist potential home buyers who experienced unemployment or other severe reduction in income due to the recent recession and help these people to be eligible for a new home loan. Previous FHA guidelines called for a minimum of 3 years after a foreclosure or shortsale. Under the new rules a borrower may be eligible for a new FHA mortgage loan after just one year.

This is great news for people who had a shortsale or foreclosure that was specifically due to a loss of income and not just a loss of value in the property. The borrower must be able to demonstrate that the credit impairment was directly tied to an economic event that was beyond their control and then have re-established good credit for at least a year since the event. Also, as part of the mortgage approval process the borrower must attend a HUD approved housing counseling course.

The rules that have been set down are very specific so there are going to be a lot of people who have situations that fall outside of these new rules and those will have to continue to wait for a 3 year time period on FHA and up to 7 years for a conventional loan (minimum of 4 years from a shortsale and 7 years from a foreclosure). Here are the specific guidelines:

1. Must be able to document an Economic Event that was beyond their control that resulted in at least a 20% drop in income - loss of employment, etc.

2. The date of the Economic Event must coincide with the beginning of any credit impairment that occurred. Meaning, the credit issues, which could include a shortsale, foreclosure, bankruptcy, collection accounts or late debt payments, occurred beginning with the loss of income. It is very important that the borrower had a nice clean credit report prior to the loss of income.

3. The borrower must have re-established good payment histories for at least a 12 month time frame since recovering from the loss of income. Bottom line - no late payments in the past 12 months.

These rules are pretty specific but will help some potential home buyers to move back into home
ownership. If you know of someone who could benefit please pass this along to them!

Ken Mascia, Licensed Loan Officer NMLS 135323

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