Once again I’ve asked the expert to explain something we’ve seen in the news recently, and put it in context for those of us in Charlottesville Thanks, Matt.

Much has been made of the reinstatement as of October 1, 2011 of the FHA high cost loan limits. In actuality, this will have no effect on Central Virginia borrowers.

To provide some background, if we exclude portfolio, VA, USDA and VHDA loans, which only reach a small percentage of borrowers, then conventional conforming, conventional non-conforming and FHA are the three routes to go to finance a new purchase or a refinance. For conventional loans, which are Fannie Mae and Freddie Mac, the current year’s limits are $417,000 nationwide and a maximum of $625,500 (150% of the nationwide limit) for high cost areas, county by county.  

For FHA loans, HUD establishes a County by County review . Since October 1st, the high limit is $729,750 and the “floor” even in the lowest cost areas is $271,050. Any loan over $417,000 or the high cost limit in your county would cause a choice of either jumbo (non-conforming) pricing, which can be as high as 1% higher or conforming loan limit with a home equity line or loan second. HUD finally released a mortgagee letter on Friday, December 2nd with the new loan limits, so lenders can actually start originating them.

So, what does the reinstated limits in the Charlottesville MSA (Albemarle, Charlottesville, Fluvanna, Greene and Nelson) really mean? Nothing. We have the same loan limits of $437,000 (slightly high cost) now as we had before. There wasn’t even any change in Staunton or Waynesboro ($271,050), Harrisonburg ($277,150), Lynchburg’s MSA ($292,100) or Richmond MSA ($535,900). The effect was felt in Northern Virginia, where they lost their high limits.