The U.S. Department of Housing and Urban Development is increasing home loan limits to help more Lynchburg metro area families own homes. Here is more information from HUD:

The U.S. Department of Housing and Urban Development’s Federal Housing Administration (FHA) has increased its single-family home mortgage limits by almost 8 percent to $292,100 from $271,050 effective January 1, 2010. HUD Acting Richmond Field Office Director Charles Famuliner announced the higher loan limits today.

“In today’s challenging financial climate, clearly FHA provides a safe and affordable option for those trying to purchase or stay in their homes and to refinance a mortgage,” said Famuliner.  “FHA provides a huge economic stimulus which trickles down to local communities in the form of new jobs, work for building suppliers, an increase in the tax base, more schools, and other forms of revenue.”

The Lynchburg metro area includes Amherst, Appomattox, Bedford County, City of Bedford, Campbell, and City of Lynchburg.

FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance.

Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require a 3.5% down payment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment.  In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.

FHA is the only government agency that operates entirely from its self-generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely.

The new loan limits are part of an annual adjustment HUD makes to account for rising home prices. 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.

FHA is the largest government insurer of mortgages in the world. FHA provides mortgage insurance on single-family, multifamily, manufactured homes and hospital loans made by FHA-approved lenders throughout the United States and its territories. While borrowers must meet certain requirements established by FHA to qualify for the insurance, lenders bear less risk because FHA will pay the lender if a homeowner defaults on his or her loan. FHA has insured over 37 million home mortgages and 47,205 multifamily project mortgages since 1934. Currently, FHA has 5.2 million insured single-family mortgages and 13,000 insured multifamily projects in its portfolio.

For more information on buying a home, contact a HUD-approved housing counselor at (800) 569-4287.