This past October, the Federal Housing Finance Agency, or FHFA, reviewed the numbers reported in the Housing Price Index. The HPI monitors the average home values nationwide and FHFA reviews these numbers and compares them with the previous years’ HPI tally. If there is a year-over-year increase in the HPI, FHFA directs Fannie Mae and Freddie Mac to raise the maximum conforming rate accordingly. If there is no change or even a reduction in value, the conforming loan limits remain the same for the following year.
The average value across the country rose by 6.9 percent from the previous year so the new conforming loan limits for 2019 were raised by the same amount from $453,100 to $484,350. These same limits apply to homes in Alpharetta, Georgia and Fulton County in general. The new conforming limits are announced in late November. VA loan limits follow the conforming limits and will be increased by the same amount. But what about FHA loans?
FHA loans are government-backed which means they carry a guarantee to the lender should the loan go into default. This guarantee is financed by two separate forms of mortgage insurance. There is an upfront mortgage insurance premium rolled into the loan amount and an annual premium that is paid in monthly installments and included in the monthly mortgage payment.
The Federal Housing Administration must wait until the announcement of any change in the conforming loan limits. Once the announcement is made, FHA makes its own new limits known and is calculated at 115 percent of the median home value for the county in which the property is located. The median home value in Fulton County came in at $330,000. Because Fulton County home values are higher compared to other areas, the maximum FHA loan amount will be $379,500. For a duplex, the limit will be $485,500, $587,250 for a three-unit property and $729,800 for a four-unit. These new amounts will be effective as of January 1, 2019.
FHA loans can only be used to finance a primary residence and cannot be used to finance a rental or investment property. FHA loans can however be used to finance a multi-unit property as long as the borrower occupies one of the units as a primary residence.