The Federal Housing Finance Agency on November 28th raised the conforming and high balance loan limits for a Fannie Mae and Freddie Mac loans. Here’s what these changes will mean…
Each year the Federal Housing Finance Agency which oversees Fannie Mae and Freddie Mac reviews and evaluates changes on whether to keep the loan amounts current or whether to increase the loan limits.
Based on a broader growing economy the government decided to increase the loan limits on Fannie Mae and Freddie Mac backed mortgages. These loan limit increases mean that you can still get the same underwriting on bigger loan sizes.
The conforming loan limit has gone from $453,100 to $484,350. The maximum limits have gone up to $726,525. These loan limit increases are representative for single-family residences. Other residential 2-4 units have also risen as well for example in Sonoma County, California the maximum loan was previously 648600.
Now that new limit is $704,950. With larger loan sizes under Fannie Mae and Freddie Mac loans buyers can avoid having to go with jumbo mortgages which typically require stellar credit, strong income and big equity such as 15% or more. Loans that are backed by Fannie Mae and Freddie Mac up to the maximum loan limits can be financed with as little as 5% equity and up to the conforming loan limits with as little as 3% equity. This means 5% down or 3% down when purchasing a home under a Fannie Mae Freddie Mac conventional mortgage without income limits.
Here’s some scenarios on how this will help mortgage borrowers purchasing or refinancing property…
-Less down with bigger loan sizes means you can borrow more money
-Some jumbo mortgage loan investors go down to the conforming loan limits so for example it might be possible to refinance that second mortgage that’s a home equity line of credit that has no draws on it in the last 12 months under a jumbo mortgage with a conforming high balance loan limit allowing you to fit that square peg in a round hole after all.
-Larger loan sizes can give buyers a bigger advantage to be able to qualify for more house in a competitive offer situation.
-Larger loan sizes under Fannie Mae and Freddie Mac also allow for better financing for example let’s say that you were looking at an interest rate at the maximum loan limit of $453,100 that increase is now gone up to $484,350 allowing you to otherwise get the same interest rate on a bigger loan without your loan being considered high balance which are not as lucratively priced to the consumer.
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