The Federal Housing Administration (FHA) has announced that, like Fannie Mae and Freddie Mac, are increasing their loan limits. This increase is a substantial increase from the previous limit and, in many ways, it could have a more significant impact on housing. FHA loans remain the best option for borrowers who do not qualify for conventional financing and this increase opens the door for many buyers who were previously priced out of many markets.
Many of the benefits for buyers, sellers and homeowners will be similar to those afforded by the changes to conventional loans announced earlier this week and you can refer to my recent article Conforming Loan Limits Have Increased in 2020. What Does This Mean? to see the specifics and beneficial impact of the increase, but I do see one standout benefit with FHA. Because of its flexibility, FHA can sometimes provide a means for struggling borrowers to refinance. Divorcing clients, for example, sometimes see major shocks to their financial situation with the dissolution of a marriage and the establishment of two households. FHA can often provide a means for these couples to either stay in a property where conventional financing does not work. I see this regularly in my practice and it s not an inconsequential thing.