FHA changes their mortgage limits on a yearly basis. Home buyers should keep in mind what they are and how they might change. Here is an overview of the new limits for FHA mortgages in Michigan.
An Explanation of FHA Mortgage Limits
Mortgage limits reflect maximum mortgage values that comply with an FHA mortgage. The mortgage value is not equivalent to the sales price. For example, if you buy a home for $ 325,000.00 and you have a down payment of 3.5 percent , then the mortgage value is $ 313,625.00.
How Are FHA Mortgage Limits Calculated
FHA mortgage limits differ by state and city. Median home sale prices are measured against the national conforming mortgage limits. Conforming mortgages are those that fall within Freddie Mac and Fannie Mae rules and can be transferred in the secondary mortgage market. FHA calculates 65 percent of the limit for conforming mortgages and uses that as their bottom limit for low end communities. Low end communities are communities where 115% of the median home value is lower than 65% of the conforming mortgage limit. For high cost markets, the limit may reach 150% of national conforming mortgage limit. High cost markets are those where 115 percent of the median real estate values are greater than 150% of national conforming mortgage limits.
New Limits For FHA Mortgages In Michigan
The mortgage range is $271,050 and $625,500. So, in no case will the limit drop under $271,500 or be higher than $625,500. Both the low and high limits match 2014 figures, but many areas are not at this min or max and will thus have a change for this year. There are also varying limits for particular property types. Exact figures can be found at https://entp.hud.gov/idapp/html/hicostlook.cfm.
Importance of Understanding New Limits For FHA Mortgages In Michigan
It is necessary to know your max purchase price throughout the process. Buying a house above the max will lead to a larger down payment or require you to research another mortgage program. For instance, if the mortgage limit in your region is $ 290,000.00 and you intend to submit 3.5% down, then your price limit is $ 300,518.13. Buying a home for $ 306,528.50 leads to a $ 6,010.36 gap. The home buyer would need to provide this money. If you are a cash sensitive home buyer, this can prevent the deal from happening. Remember that the maximum purchase price might not be identical for every community that you are looking in. It is helpful to know what they are while you are searching for a house.