The Federal Housing Administration has increased its single-family home mortgage limits by more than 15 percent, Housing and Urban Development Secretary Alphonso Jackson said Tuesday.

Effective Jan. 1, 2006, FHA will insure single-family home mortgages up to $200,160 in standard areas and up to $362,790 in high-cost areas, HUD said.

The high-cost amount is almost $50,000 more than last year. The loan limits for two-, three- and four-unit dwellings also increased. FHA is sending letters to thousands of mortgage lenders and brokers to make them aware of the higher rates that can help families, the agency said.

“This administration is working to make home ownership more affordable and accessible so that more families can own a piece of the American Dream,” said Jackson.

“These higher loan limits will strengthen the economy by helping to create more construction and more jobs, while contributing to the President’s commitment to create 5.5 million new minority homeowners by the end of the decade,” Jackson said.

Last year, the loan limits were $172,632 in standard areas and $312,895 in high cost areas. Five years ago, the limits ranged from just $132,000 to $239,250. These levels were below the cost of many homes in many communities.

As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process.

The new loan limits are part of an annual adjustment HUD makes to account for rising home prices. Under federal law, loan limits are tied to the conforming loan limits of Freddie Mac and Fannie Mae, federally chartered corporations that buy and package mortgages.

HUD calculates the FHA mortgage loan limit for 3,226 geographic areas within the United States. The limits vary from area to area, but all fall within the new rage of $200,160 to $362,790.

Higher FHA loan limits don’t cost the government any money, because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA insurance.

Many low-income and first-time home buyers are attracted to FHA-insured loans because the agency requires only a 3 percent down payment.

The increases will also benefit senior citizens who qualify for FHA-insured reverse mortgages. Reverse mortgages allow homeowners age 62 and older to borrow against the value of their homes without selling them. Homeowners can select a lump-sum payment, monthly payments or tap into a line of credit. No repayment is required as long as a homeowner lives in a home with a reverse mortgage. The reverse mortgage is repaid, with interest, when a homeowner sells the home or dies.

HUD is a federal agency that implements housing policy.

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Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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