April 17, 2020
Are you new to the idea of owning a home? Are you interested in applying for a home loan when the time is right but aren’t sure about how it all works?
First-time home buyers aren’t the only ones who can apply for FHA mortgages, but they often apply for FHA purchase loans and construction loans thanks in part to the FHA home loan program’s reputation for being helpful for those who need a lower down payment, or who have past credit issues, or past credit issues.
Some FHA home loan jargon is confusing at first, but take the time to learn what some of these things mean and you’ll find that buying a home isn’t as daunting as it might seem when you were still in the learning stages.
It is always a very good idea to begin preparing for your home loan journey early; learning about the process and how it works can help you long before you are ready to actually fill out mortgage loan paperwork.
FHA Home Loans And Conforming Loans
No matter if the loan you’re interested in is an FHA One-Time Close construction loan, an FHA purchase loan for existing construction, or even a USDA or other type of home loan, you will encounter the phrase “conforming loan” in your home buying journey.
A conforming loan is a mortgage that adheres to guidelines set forth by Fannie Mae and Freddie Mac including a maximum dollar amount the loan can be and still be within the Fannie and Freddie limits. These limits are set by county and are subject to revision each year.
The loan limits are not the same all over the United States; there are low-cost areas and high-cost areas. Each has a loan limit as established by Fannie and Freddie annually.
A conforming loan is easier to qualify for because of lower FICO score requirements and other factors; non-conforming loans, also known as Jumbo Loans are harder to financially qualify to get as they require higher down payments and higher FICO scores. Non-conforming loans carry a higher risk to the lender.
FHA Home Loan Limits
The conforming loan issues we’ve been discussing apply to conventional loans, but similar considerations apply for FHA mortgages. FHA home loans have limits that are set by county just like the Fannie and Freddie conforming loan limits. An FHA conforming loan would be at or under the FHA loan limit for that area.
Furthermore, FHA home loan limits are influenced by the limits set by Fannie Mae and Freddie Mac. In late 2018, the Federal Housing Finance Agency (FHFA) announced that Fannie and Freddie loan limits would increase in 2019 similar to the increases announced in the previous year.
FHA mortgage loan limits are not set by Fannie and Freddie, but are influenced by them. In 2017 FHFA announced higher loan limits and it would not be long before the FHA announced similar increases for 2018.
Borrowers should know that FHA mortgage loan limits for conforming loans do not change every year, but the potential for such change is always there.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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