FHA Boosts Insurable Home Loan Amount

With Orange County’s housing costs rising, potential homeowners soon will be receiving a boost from the Federal Housing Administration, which has increased the loan amount it will insure in Orange County by 16% to $197,621.

That could help more first-time buyers, in particular, live the American Dream. The loan limits were raised to $170,362 in Orange County in January. But two weeks ago, President Clinton signed a bill raising the limits again.

With FHA-backed mortgages, down payments are usually 3% or less, a smaller amount than required by traditional lenders. In addition, credit requirements are looser, and out-of-pocket expenses are smaller, since closing costs can be folded into the mortgage. Federal guidelines allow consumers to qualify for these loans if the monthly costs of owning a home amount to about 29% of a buyer’s gross income, and if overall debts add up to roughly 41% of untaxed income.

That is expected to help some homeowners in Orange County, one of the priciest housing markets in the nation. The median price of a home stood at $227,000 in September, down from an all-time high of $236,000 this summer.

The higher ceiling for FHA loans should boost the percentage to 15% of the transactions in Orange County from 12%, according to D.A. Westerfield, chief of the U.S. Department of Housing and Urban Development’s homeownership center in Santa Ana.

But if home prices continue to go up, fewer people will qualify for FHA loans in the county, he said.