For the life of me, I don’t understand why FHA’s lending limit is higher than the FF conforming limit of $417K!
The FHA was put in place in 1934 specifically to aid FT homebuyers, including low and moderate-income households to offer 96.5% financing on 1-4 units (where the buyer is in residence) to give them a “leg up” into homeownership.
Nka “FHA 203b,” this MIP program was NEVER intended for move-up/luxury purchases or investment properties but that is what it is typically used for in SD County, what with a current $729,750 loan limit! Even though few applicants can likely qualify to borrow this amount, this is way too much money to loan someone who puts only 3.5% to 5% down, IMO.
The FHA loan limit in SD County should currently be set at $300K. This would allow for an approximate $312K purchase at 96.5% financing. THIS is the type of property the FHA was put in place to finance!! And prospective owner occupants who are shopping at this price point or below are the exact audience the program was put in place to serve.
Slightly OT: Ditto for VA loans. The VA loan limit should be lowered to $417K. The current $477K limit is asking for big trouble, due to the program having zero down (subject to qualifying) for up to $477K. The vast majority of military spouses stationed in SD (male or female) are very young, have little to no college under their belts, and are employed only part-time or unemployed. In addition, the typical active duty military family is subject to COS orders as little as every 24 months.
I think the VA limit should also be $417K for retired military, assuming they still have the benefit (if they used it at one time, it has been reinstated). More than half of military retirees live on their pensions plus “side jobs” or PT work. These are the ones who are native to the area and/or still have family here or purchased a family home long ago in SD, rented it out intermittently throughout their career and never took cash out or sold it. The majority of longtime spouses of retired personnel (if they still have one) never worked or only worked part-time. Most of the newly retired personnel who can’t find good jobs immediately after retirement in SD choose to have the military move their personal effects free back to the area where they first enlisted or any other place in the US where housing costs much less than here. The typical military family in SD lives in military housing complex(es) (which includes all utils but cable/cell phone paid) the entire time of their occupancy but has little to nothing saved upon retirement from the military. They have 30 days from the date of their retirement to vacate their military housing quarters or are cut off from their (now extremely generous) housing allowances within 30 days.
These families have no business borrowing $477K … or $417K for that matter.
This is coming from a person who has lived around a LOT of retired military for decades.
The reason why there have always been a lot of HUD/VA repos (yes, even when the limits were under $100K) is because of all of the above.
