Barring Congressional action, FHA loan limits will decline on October 1 in 669 counties across the country. Current limits, which are high relative to median home prices, were established via three federal laws enacted in 2008 & 2009.
Historically, FHA loans exist to serve low and moderate income home buyers. Without the housing meltdown and financial crisis they would typically be capped at 115% of the median home price for a county. The median price in Maricopa/Pinal counties (Phoenix MSA) is around $120,000. However the FHA loan limit in that same MSA is $346,250. These extra high FHA limits, inflated by laws designed to hold up the housing market, will go away on October 1.
Fortunately they won't drop to 115% of the median price, because there is a floor for FHA loan limits which is 65% of the conforming loan limits (for Fannie Mae & Freddie Mac). The conforming limit is still $417,000 so here in Phoenix the maximum FHA loan is expected to drop to $271,050.
Other notable AZ counties:
Coconino (Flagstaff & Sedona) will drop from $450,000 to $333,500.
Pima (Tucson) will drop from $316,250 to $271,050.
For my friends and relatives still in Los Angeles County, those FHA limits will drop from $729,750 to $625,500.
If those drops in maximum lending limits don't seem so bad, consider this... If Fannie Mae & Freddie Mac drop their limits, or those entities disapear, then FHA limits can fall much further.
If your thinking about buying a home in the high $200,000 to mid $300,000 range in Arizona, I would move to make that purchase this summer.
Here's a link to FHA's announcement and a list of all the affected counties across the country.