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Higher Loan Limits for Homes in Lynchburg Area

By Sally Maison
Published: Saturday, January 9th, 2010

The Federal Housing Administration (FHA) recently raised the maximum amount of home loans in Lynchburg area so buyers can keep up with the new median home prices. The change will also allow them to have more choices when it comes to choosing the home they want to live in. However, local real estate agents do not view the increase as substantial and believe that it will not be able to create sweeping changes in the housing market.

Higher Loan Limits for Homes in Lynchburg AreaEffective on New Year’s Day, FHA is now insuring home loans up to $292,100 for single family homes in Lynchburg, VA. The 7.8 percent increase is part of the Housing Administration’s plan to help homebuyers meet the new median home prices.

This means people who want to start their year with a new home can already be insured by FHA for loans worth $292,100. Getting federal insurance allows buyers to purchase homes at lower down payments and interest rates, even if they do not have super prime credit scores. Having a credit rating between 720 and 850 is one of the very few ways homebuyers can get low interest rates for personal loans, experts comment.

Despite raising the ceiling on the amount of home loans consumers can avail, Dee Meredith believes the raise is not quite significant. The President of the Lynchburg Association of Realtors said that this increase, which is about $21,000, is not likely to cause huge changes in the local housing market. Being in the industry for more than two decades now, Meredith has not seen huge changes caused by increase in FHA loan limits.

She explained that this increase will allow homebuyers to get more expensive homes, but there will no be significant changes since those who apply for FHA-back loans buy less expensive properties.

FHA secures loans for consumers in case they default, which minimize risks taken by creditors. Moreover, FHA-backed loans only require a down payment of 3.5 percent, unlike unsecured loans which typically require a 10 percent down payment. Homebuyers who have precarious credit ratings might even be required to pay down 20 percent of their loan’s amount.

Meredith said FHA loans are most often availed by people who want to purchase homes within the $120,000 to $140,000, do not have a lot of cash for down payment, and may not have a pristine credit score.

Experts say people who want to purchase homes at the upper limit of FHA loans typically do not need federal insurance. People who buy expensive loans, but still look for federal insurance are most likely to have trouble meeting minimum down payments or may have trouble with their credit ratings.

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