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Lower Federal Housing Administration loan limits take effect Oct. 1

The government is set to lower the maximum amount that can be borrowed and still qualify for FHA insurance starting in October. Without FHA loans, borrowers will have to apply for conventional mortgages, which may come with higher interest rates and down payments.

The change could hinder the housing recovery in high-cost markets according to industry observers.

FHA mortgages are popular with new home buyers, because the loans feature low interest rates and down payments as low as 3.5 percent. Last year, FHA insured more than 40 percent of homebuying loans in the United States.

Do you think you'll be effected by this? Experts say to start looking for a home now because it takes up to 45 days to finalize mortgages.

The lower loan limits were supposed to take effect in January 2009, but ongoing problems in the credit markets prompted Congress to postpone the changes. Now, those limits will take effect Oct. 1, unless lawmakers take action.

 

To read the full article about the FHA loan change, click here.

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