Why some families won't be able to buy as big a house next year

Starting January 1,  it could be a bit harder to get a home loan backed by the Federal Housing Administration.  That’s because caps on loans that were raised during the housing crisis are going back to pre-crisis levels. 

The Federal Housing Administration guarantees mortgages that are made by banks, but there’s a limit on how big a mortgage it’ll take on.  Now that limit is going down, from  $729,750 to $625,500.  

Stephanie Karol, an economist at IHS, says buyers in the more expensive housing markets will feel the pinch.

“This is really only going to affect buyers who are looking for really high priced homes," she says. "Those guys are few and far between.”

Guy Cecala, who publishes Inside Mortgage Finance, says he thinks the changes could shut out some new buyers.

“FHA is the mortgage finance of choice for first-time home buyers," he says.  "Generally they’re locked into that FHA financing, and that’s the only option they’ve got.”

Cecala says, the housing recovery should continue. Although it will get a little nick from the new FHA limits. 

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.

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