Impact of FHA loan limit reductions

On September 30, 2011 the US Congress allowed FHA and conforming loan limits to drop from 125% of an area's median home price to 115%. While critics of the higher loan limits claimed that the government shouldn't be supporting mortgages 'for the rich,' recent data shows that the reductions have had a larger impact to the overall real estate market.

According to a survey conducted by the National Association of REALTORs NAR Research arm, 16% of home buyers were forced to leave the market because of the reductions. Especially hard hit were areas with high median home prices and areas where there are a wide range of home prices.

Further survey results showed that 52% of buyers had to come up with additional down payment money and 32% were forced to look for a lower priced home. 

In Denver, FHA loan limts dropped on October 1 from $406,250 to $368,000.