At the beginning of each year new mortgage limits are announced. That's the case this year, but with a twist: For the first time in seven years the VA loan ceiling has been raised.

Conventional Loans

If possible, you want to borrow no more than the "conventional" or "conforming" loan limit. Go over the limit and you'll have a "jumbo" mortgage, a form of financing which usually requires the payment of a higher interest rate.

When mortgage loan limits rise it means that more homes can be bought with conventional financing -- that's good news for both buyers and sellers. For 2002, the conventional loan limit for a single-family home has been raised to $300,700, a 9.36 percent increase over last year's limit, $275,000.

The new conventional loan limits look like this for 2002:

• Single-Unit Properties: $300,700

• Two-Unit Properties: $384,500

• Three-Unit Properties: $465,200

• Four-Unit Properties: $578.150

• For properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the loan limits are 50 percent higher.

FHA Financing

The federal government, through the Federal Housing Administration (FHA), provides loan insurance for consumers. With such insurance, lenders will readily make loans with as little as 3 percent down.

How much you can borrow with FHA financing depends on the community where you live. The FHA loan limit varies according to local home pricing and the number of units being financed. For details, please speak with your real estate broker.

Depending on location, the FHA loan limits for 2002 include:

• One-Unit: $144,336 to $261,609

• Two-Unit: $184,752 to $334,863

• Three-Unit: $223,296 to $404,724

• Four-Unit: $277,512 to $502,990

• Higher rates apply in Alaska, Guam, Hawaii and the Virgin Islands.

VA Financing

Those who have completed qualifying federal service, typically individuals with military service, may be able to obtain loans guaranteed by the Department of Veterans Administration. Such loans are attractive because they allow purchasers to buy with no money down.

The VA does not make loans. Instead it guarantees to repay 25 percent of a loan in the event borrowers default. That guarantee, plus the value of the property, means that lenders can make VA loans with little risk.