FHA Loan Limit May DECREASE For Kern County Effective October 1, 2011

The amount someone can get an FHA (first time homebuyer's assistance program) loan for to purchase a home may decrease, effective October 1, 2011, according to a 23 page report from the U.S. Department of Housing and Urban Development ("HUD") - Office of Housing / Risk Management and Regulatory Affairs / Evaluation, released May 26, 2011.


FHA home loans are especially important in today's real estate market because, instead of the usual 20% down payment required by most conventional loans, the home buyer can buy a home with as little as 3.5% of the purchase price as a down payment with FHA loans. The current limit for Kern County (Bakersfield and surrounding cities) is $368,750. The recommendation is to revert to 2008 allowed loan limit, which would be $271,050, a loss of $97,700. Bottom line, people interested in purchasing a home for a purchase price of $271,051 or greater can no longer use an FHA loan up to a $368,750 purchase price maximum. They will instead have to purchase with a conventional loan, increasing their required down payment from 3.5% to possibly as high as 20%.


Intro paragraph from report:

Barring Congressional action, Federal Housing Administration (FHA) loan limits will revert

back to loan limits determined under the Housing and Economic Recovery Act (HERA) for loans

insured by FHA on or after October 1, 2011. As a result, FHA loan limits would likely decline

in 669 of the 3,334 counties or county equivalents that are eligible for FHA insurance. A

complete list of FHA loan limits for the 669 potentially affected counties and county equivalents

is provided in Table 1of this Market Analysis Brief. The remaining 2,665 counties are unlikely to

experience a change in loan limits. This Market Analysis Brief discusses the location and impact

of the potential loan limit declines as initial guidance to the industry and consumers. Additional

information and analysis may be shared in the coming months.

*Included in "Stuff that can decrease your home value" because this can narrow the number of potential buyers for your home, depending on your home value. The less number of buyers for your home, the less you will likely receive for your home in this market.