As part of the recent economic stimulus package signed by President Bush, conforming and FHA loan limits for high cost areas has been temporaily increased until December 31, 2008 to $729,750 for high cost areas like Contra Costa, Santa Clara and Alameda Counties. This is more more than double the previous limit off $362,790 The limit, which is good until the end of the year when it it returns to $362,790, will apply only to loans insured under a program administered by FHA, which targets low- to moderate-income home shoppers. Under a previously announced plan by President Bush, called FHASecure, FHA has expanded to refinance some homeowners with adjustable rate mortgages even if they are behind on payments. The following link provides additional information: http://www.hud.gov/news/release.cfm?content=pr08-030.cfm
Today, Congress is taking action to make these changes permanent with proposed FHA Reform which has passed both the House and Senate and is currently in a conference committee. The primary concern of FHA Reform is the increase in loan limits. The Senate version calls an increase to $417,000 while the House version calls for an increase up to $729,750. Becuase of its high home ownership cost, California would benefit by the House's FHA Reform version of with higher loan limits. Also, the FHA Reform includes a reduction in the downpayment requirement for FHA loans and will include condominiums in FHA single-family program.
New home buyers will benefit by these higher loan limits and have the opportunity to purchase homes with no money down by the use of Sellers Assistance Programs like Nehemiah (http://GetDownPayment.com). This program provides for gifts (allowed by FHA and some conventional programs) of up to 6% of the purchase price to assist in paying for the buyers down payment and closing costs. In this market, with high housing and foreclosure inventories, buyers, working with knowledgeable Realtors and lenders can get seller concessions to contribute to the Sellers Assistance Programs and pay closing costs. It's still important that buyers and their agents identify properties that are in good shape, safe and habitable. I strongly suggest that buyers not hold back on inspections and complete nothing less than a pest inspection and home inspection to insure that there aren't large hidden expenses and required cash outlays. Additional inspections, including roof, septic and well may also be ordered. Its better top spend the $500 to $1000.00 up front to identify any hidden defects, than to find repairs requiring $10,000 or more that could greatly impair the purchase experience.