PURCHASE DENIED! FHA MAX Loan Limit Changes Going Into Effect 10/1/2011

PURCHASE DENIED! FHA MAX Loan Limit Changes Going Into Effect 10/1/2011

This may happen to you if your purchase/sale is above the county loan limit for FHA mortgages. As of this writing the federal government has not extended the increased maximum loan limits on FHA loans. The current temporary higher county loan limits expire as of September 30, 2011.

This means that if you do not have CREDIT APPROVAL (see below for definition of credit approval) as September 30^th, and your loan amount (not purchase price) exceeds the new county loan limit for FHA insured mortgages as of October 1, 2011, your borrower may need to:

1. Provide additional down payment to bring the loan amount within the new limits.

2. Switch from FHA to conventional financing (additional down payment may be required).

3. Renegotiate the purchase price so that the loan amount is within guidelines.

4. Withdraw contract and start searching for a new home that will meet the county loan limits and the borrower’s asset requirements.

LISTING AGENTS AND SELLERS BEWARE: If the temporary loan limits are not extended, it may limit the pool of potential buyers for your home.

Hopefully the fed will extend the temporary limits through the next fiscal year. Why do they always seem to wait until the last minute?

Be sure to contact the loan officer for files in process that may be affected by this change.

FHA MAXIMUM MORTGAGE LIMITS IN MARYLAND (Sample by County)

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Anne Arundel, Baltimore, Baltimore City, Carroll,

Harford, Howard, Queen Ann’s

Current (thru 9/30/2011) New (10/1/2011-12/31/2011

$560,000 $494,500

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Cecil

Current (thru 9/30/2011) New (10/1/2011-12/31/2011

$420,000 $379,500

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Calvert, Charles, Frederick, Montgomery, Prince George’s

Current (thru 9/30/2011) New (10/1/2011-12/31/2011

$729,750 $625,500

PLEASE NOTE:

• The limits above are for single family primary dwellings only. The loan limits increase for multi-family dwellings (2-4 family where the owner occupies one of the units)

Different Rules Apply for FHA Refinancing. Please contact me for loan specific information.

To determine if your loan meets the guidelines for the new loan limits by specific state and county, go to:

FHA Jumbo Mortgage/High Cost Loan Limit 2011

What is Credit Approval?

According to FHA Mortgagee Letter 11-29

Credit Approval is defined as the underwriter’s approval date of the loan. [NOT Application, NOT Case Number Pulled]. Credit approval requires that all of the following criteria are met on or before September 30, 2011. If any one of the criteria below has not been completed on or before September 30, 2011, the loan does not have credit approval and can only be considered for the new FHA loan limits in effect on October 1, 2011.

· A Direct Endorsement (DE) underwriter has approved the loan (i.e., the lender has received and accepted approval via TOTAL Scorecard, or has manually underwritten the loan) on or before September 30, 2011.

· The approval includes the DE underwriter’s review and approval of the appraisal on or before September 30, 2011.

· The HUD/VA Addendum to Uniform Residential Loan Application, Form HUD 92900-A, page 3, must be signed and dated by the underwriter on or before September 30, 2011.

· The FHA Loan Underwriting and Transmittal Summary, Form HUD-92900-LT must be signed and dated by the underwriter on or before September 30, 2011, for manually underwritten loans.

· The Underwriter Approval Date on the Insurance Application Screen in the FHA Connection must be on or before September 30, 2011.

· The Appraisal date must be on or before September 30, 2011, and must be effective at loan closing date.

· HUD has issued a firm commitment date for insurance (for test cases) on or before September 30, 2011.

· Borrower and terms of the loan must be the same as the borrower and the terms approved on or before September 30, 2011.

· The case number has not expired or been cancelled – no assignment or new case numbers permitted.