If you’re like many other Minnesota residents, you’ve been watching the housing market carefully, wondering if it is the right time to make a purchase or put a home up for sale. Prepare yourself for some good news!
The struggling real estate market has been offered a helping hand. Last week, the Federal Housing Administration temporarily doubled the limit for loans it guarantees throughout Minnesota. In the 13-county Twin Cities metro area, the limit on FHA backed loans rose from $276,683 to $365,000. For greater Minnesota, the limit rose to $271,050, up from $200,160. According to the Minneapolis Area Association of Realtors, these changes mean that 77% of homes currently for sale could be purchased through FHA.
Since the collapse of the subprime-mortgage industry, FHA has been eager to step into the lending gap left behind. However, it’s been hindered by limits on the size of mortgages it can guarantee, a serious problem in places like the Twin Cities, which tend to have more expensive housing. Those who stand to benefit the most from these adjustments are first time homebuyers, homeowners locked into adjustable-rate mortgages, and sections of the Twin Cities metro area that otherwise would not have been eligible for such loans due to high real estate values.
Also, according to a recent court ruling, home buyers
may continue to use certain down-payment assistance programs when purchasing a home using an FHA mortgage. Believe it or not, FHA financing used to be much more popular than the alternate subprime conventional programs which have caused so much trouble. FHA has a record of putting qualified buyers who were ineligible for conventional mortgage programs into homes. FHA loans can be configured as 0 down loans, meaning if you don’t have much for a down payment, there are options available to you once more!
The increased loan limits are part of an economic stimulus package passed by Congress earlier this year and signed into law by President Bush on February 12th. Over the next few days and weeks, HUD is expected to raise the limits in other counties nationwide as well. This will produce drastic results in the markets affected by these loan limit increases by making credit less risky for banks, which in turn makes home buying easier. It also reduces consumer interest rates.