Starting in January, 2014, the FHA, Federal Housing Administration, will be lowering the loan limit on maximum amounts of loans especially in high cost areas. The standard of $417,000 will remain standard across the board but in high-cost areas of California, Florida and New York, these loan limits will be decreasing. Generally speaking, the high cost limit was at $729,000 and starting in January it will decrease to $625,000. This means that those applying for an FHA backed loans will only be able to apply for loans up to the $625,000 mark. Anything over that and they will have to go for a conventional loan or through other loan outlets.

There are a variety of other figures involved depending on which county and which city you live in. Different cities have different median incomes and different median home prices so the limits are basically built on those median home prices for a particular area. If you live in a higher cost area the limits may be slightly increased.

An FHA loan is backed by Fannie Mae and Freddie Mac and requires a 3.5% down payment to qualify. Lenders will also be getting stricter when it comes to qualification starting next year. Credit scores will need to be higher and there will be more documentation needed to apply for a loan. The100 page documents needed for an application will now jump to about 500 pages especially for those that are self-employed and have a lot of extra paperwork. This means a lot of extra work for the lender, the mortgage broker and the agents as well. Lenders will be getting tighter on whom they will approve and who qualifies. They will be carefully digging through all of a borrower’s income to make sure that they are not missing any income somewhere or there’s anything that looks out of the ordinary.

So what is this all mean for buyers?

There’s always new changes in the mortgage industry from year to year and there are acts and bills that will get approved an extended at the 11th hour so there really isn’t a whole lot to worry about if you’re considering buying within the next year. One of the best ways to start is to make sure you have a mortgage lender or mortgage officer that you trust, stay in communication with, and helps you find the right program and the option that best fits your finances. Need more information? Contact the experts in real estate at REFindly.com