FAQs about FHA Modernization and the Stimulus Bill

Thanks to reader Frank for sending this brief FAQ about the Federal Housing Administration’s Modernization bill and the Federal Stimulus Bill that was just passed.  With all of the confusion around the changes proposed to FHA loan limits as well as the new conforming loan limits that will be in effect as a result of the stimulus package.

 FAQ Regarding FHA Modernization

Q- Where are the new loan limits going to, and when?

A- Right now, the county loan limits are at 95% of the median home value within each individual county. The stimulus bill which President Bush passed, will raise these limits to 125% of the average median home value. A simple calculation would be to take the limit and multiply it by 1.315 (or raise it by 31.5%). We think the new loan limits will be accepted within a few weeks, and we will advise you immediately when we can close these new loan sizes.

Q- What’s the difference between the FHA Modernization act and the Stimulus Bill?

A- The FHA Modernization act is a bill that will modernize the current FHA guidelines including loan limits, tiered MIP, and may enhance current guidelines. This is currently in legislation, yet there is no time frame as to when this will go into effect. The stimulus package is an economic package which included the loan limits increasing for FHA until December 2008, however, the modernization act should put this in place for either a longer period of time, or with no termination date.

If you’ve got information or communications that help sort through the confusion send them our way and we’ll get them up to help spread the knowledge.

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