New FHA Loan Limits….Good news, but not the ultimate answer

(Riverside, California)…As part of the governments economic stimulus package, it was announced yesterday that the new maximum loan limits for real estate purchased in Riverside County would be increased for 1 year to a new amount of $500,000.  While this is a good thing, it is not the end-all, be-all answer for what ails the real estate market.

These new loan limits will be great for anyone who is interested in buying a home at this time.  The real plus to an FHA loan is that with good credit, income, etc., a buyer can obtain a loan and only need 3% of the purchase price as a down payment.  Almost anyone is eligible for this loan, and it will definitely fill the void left by lenders who now prefer to only make real estate loans to buyers with a larger down payment.  With an FHA loan, the loan is actually made by a “regular” lender, and then that lender is insured by the Federal government against any losses on the loan.

HOWEVER…these new loan limits will not help you if you want to refinance and you are behind in payments, or owe more on your existing loan than your home is currently worth.  No matter who the new lender is, and no matter what the government says, neither entity is in the market to lose additional money on making these loans.  They will not lend to you if your credit is poor (ie: you are not currently making your payments, or have numerous late pays), nor will they simply “swap” loan amounts if your current loan is more than your home is valued.  In other words, this is not the universal life-line for those who are experiencing difficulty with their existing mortgages.  Some of the public is confused by this…at least from what we are experiencing from the phone calls we have received the past two days.  Sorry, but we do not make the rules…only explain them to you as they are given to us.

We hope this clears some confusion, and if you have any additional questions, or need any information, please don’t hesitate to call us.  We know for some of you, this market sucks, but we will help in any way we can.