The Department of Housing and Urban Development gave struggling wannabee home owners a Christmas present of sorts last week, raising the limit on government-insured mortgages in 2006 to $362,790 in the nation's most expensive housing markets. The 2005 maximum was $312,895.

The new ceiling on minimal downpayment loans insured by the Federal Housing Administration means that buyers with some blemishes in their credit records can borrow almost as much as those with squeaky-clean credit histories without having to shop for financing in the subprime market where rates are substantially higher.

FHA-insured loans are used primarily by first-time purchasers and minorities who have little or no cash for a downpayment, which is typically the largest single impediment to home ownership.

Although the agency requires a minimum of 3 percent down, borrowers can use gift money to make up for any shortfall in their own funds. And sellers are permitted to cover closing costs up to 6 percent of the selling price.

Also, FHA borrowers do not need a minimum credit score to qualify. and can use gift

By law, the FHA can back loans of up to 95 percent of any given county's median house price. But at the same time, the FHA maximum mortgage amount cannot exceed 87 percent of the limit placed on loans that can be purchased by Freddie Mac, nor can it be lower than 48 percent of the Freddie Mac ceiling.

As of Jan. 1, $417,000 is the new limit on Freddie Mac loans, which are reserved for only those borrowers who have the best credit profiles and represent the least risk to lenders.

In most of the country's 3,000-plus jurisdictions, 95 percent of the median house price is less than 48 percent of the Freddie Mac limit, so the new FHA ceiling -- also known as the "floor" -- is $200,160. In 2005, the floor was $172,632.

But in the 88 high-cost counties where 95 percent of the median exceeds the 87 percent maximum, the new FHA ceiling is $362,790.

In 468 counties, the FHA loan limit is somewhere between the floor and the ceiling.

Although government-insured mortgages are considered riskier than those backed by private insurers, lenders are currently charging a lower rate, according to the latest figures published by HSH Associates, a Pompton Plains, N.J., mortgage information company.

Upfront fees on FHA loans are somewhat higher, including points and insurance premiums, but even lower-income borrowers who have been late on their credit card payments or other bills still can qualify.

The new FHA loan limits cover not only the government's basic 203(b) loan program but also several other key initiatives, including mortgage for disaster victims, rehabilitation loans, loans on properties in declining areas, condominium mortgages and home equity conversion mortgages.

The limits for 2006 also are higher for two, three and four-family properties. For two-unit structures, the range is $256,248 to $464,449. For three-unit buildings, it is from $309,744 to $561,411. And for four-unit structures, is from $384,936 to $697,696.

Published: December 29, 2005

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.