Ever wondered how FHA comes up with those goofy loan limits every year? 

In many counties across the nation the loan limit is $200,160 but hardly anyone knows where FHA gets that number.  It's a government-backed program so you gotta figure there's some contorted math going on somewhere.

FHA first takes the Freddie Mac loan limits that are announced each Fall, currently at $417,000, then multiplies that number by .48 (why that number, I have no clue) to get, you guessed it, $200,160.  This is for "low cost" counties, meaning that 95% of the homes are below the median home price for the area.   In "high cost" areas, the multiplier is .87, meaning the FHA limit is $362,790.

This is the traditional method of how FHA sets loan limits, this is not the temporary method used now to calculate the "Jumbo" FHA loan, using 125% of the median sales price of the area, which allegedly expires at the end of this year.

But Austin didn't get any boost from the temporary FHA limit, as our median home price was too low to enjoy the benefit.

But our local real estate, lender and builder associations gathered data and presented it to FHA that said the numbers they used indicated that home prices were much higher than the old number and, voila!, new loan limits.

The loan limit in the Austin area is now $288,750, whereas earlier this year we were stuck at $200,160.  That's a huge difference and opens up a whole new pool of buyers and still only 3% down.

Now you know