FHA raises limit on size of mortgage it insures 7.8 percent


The Federal Housing Administration raised by 7.8 percent the limit on the size of home mortgages it insures, a support for the entry-level segment of the real estate market.

The agency, known as FHA, will insure single-family home mortgages of up to $172,632 in low-cost areas of the country such as Texas and as much as $312,895 in areas such as California, where real estate prices have soared. The new limit for 2005 is part of an annual adjustment that the Department of Housing and Urban Development makes to account for rising prices.

U.S. home prices increased at a record pace last year, making it more difficult for people to purchase a first home. FHA insurance encourages banks to make loans to buyers who have down payments of as little as 3 percent of the purchase price by insuring against defaults.

Last year, the limit was raised by 3.4 percent.

Bloomberg News

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