Summary: The excitement of a new home purchase can sometimes override wisdom and prudence when…
Summary: FHA loan limits increased in 2020 in Seattle and the rest of the country. In this article, we’ll discuss what the new loan limit is and how that may affect your homebuying process.
Federal housing officials announced that FHA loan limits for Seattle and all other cities across the U.S. would be increased in 2020. We also mentioned that HUD officials would follow suit with a similar announcement of their own.
This is good news for borrowers who plan to use this program to buy a home next year.
New FHA Loan Limit for Seattle Area: $741,750
In the Seattle area, the FHA loan limit for a single-family property has gone up to $741,7505 in 2020. This figure applies to all of King, Pierce and Snohomish counties. Those three counties have higher loan limits than the rest of the state, due to higher home values across the Seattle area. All other counties in Washington have lower limits in 2020.
FHA loan limits went up for all counties in Washington.
The new limits will apply to FHA loans with case numbers assigned on or after January 1, 2020, and they will remain at that level through the end of the year. (These limits are typically reviewed at the end of each year, and adjusted when rising home prices warrant it.)
As of May 2020, the median home value in Seattle was around $767,900. That’s higher than the new FHA loan limit for 2020.
The following table outlines the new FHA loan limits in King, Pierce, and Snohomish counties:
Fast Facts: How This Mortgage Program Works
We’ve written about the FHA loan program a lot over the years. Here’s a quick recap of the salient points from those other articles:
- The Federal Housing Administration insures these loans against default-related losses. While this insurance primarily protects the mortgage lenders that generate the loans, it also results in flexible qualification requirements for borrowers.
- FHA loans require a minimum down payment of 3.5%. This appeals to borrowers with limited funds in the bank, including many first-time buyers. But the program is not limited to first-time buyers.
- This program requires borrowers to pay mortgage insurance premiums. While conventional (non-FHA) loans also require mortgage insurance in low-down-payment situations, it can be canceled when the homeowner reaches a certain equity level. The annual insurance premium for FHA loans, on the other hand, typically has to be paid for the life of the loan.
- The The Federal Housing Administration has congressionally mandated limits as to the size of loans it can insure. These FHA loan limits vary by county and are reviewed every year in relation to home prices.
Home Prices in the Metro Area Continue to Rise
So how does the maximum FHA loan size for Seattle compare to home prices? After all, the official limits are based on median home values. So how do they stack up?
The current loan limits for 2020 were established at the the end of last year. House prices in the Seattle metro area have risen quite a bit since then. As a result, the median home value as of July 2020 is now higher than the maximum FHA loan limit.
Earlier this month, the real estate data company Zillow reported that the median home price in Seattle had risen to $767,900. That was an increase of 2.2% from the same month last year.
So, as the year goes on, FHA borrowers might have to look harder to find a suitable property that falls within the loan limits mentioned above — or else make a larger down payment. And with the general consensus being that Seattle home prices will continue rising over the coming months, a strong case could be made for buying sooner rather than later.
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Sammamish Mortgage is a local mortgage company serving the broader Pacific Northwest region, including Washington state, Idaho, Colorado, and Oregon. We are proud to offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have any questions or are ready to apply for a home loan.