In late November, the Federal Housing Finance Agency announced that conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2019 will increase by almost 7 percent.
This change will increase the maximum conforming loan limit for one-unit properties to $484,350, up from 2018’s loan limit of $453,100.
This is the third conforming loan limit increase in the last three years, and it will take effect in most areas throughout the United States, with the exception of 47 specific counties or county equivalents.
Conforming loan limits determine the threshold at which home loans start being considered jumbo loans. This year’s change means that the cutoff point for mortgages shifting from conforming loans to jumbo loans is higher.
This is good news for home buyers who are looking to purchase a home that’s priced around that threshold amount, because the higher limit means that they can secure a larger mortgage without having to go “jumbo.”
Typically, jumbo loans come with more stringent requirements, such a higher credit scores and larger cash reserves. They may also require a larger down payment, extra appraisals, and additional fees. Sometimes they come with higher interest rates as well.
Given all of these extra requirements, most homebuyers would prefer a conforming loan when financing their home purchase. As such, the fact that the conforming loan limit has increased should make many home buyers looking to buy a home in 2019 happy!
Each year, loan limit adjustments are made based on the changes that occurred in the average price of a home in the United States. This adjustment is required by the Housing and Economic Recovery Act.
Because home prices increased by approximately 7 percent on average between the third quarters of 2017 and 2018, the conforming loan limit for 2019 was increased by the same percentage for the coming year.
In specific high-cost areas throughout the US, the conforming loan limits will be higher than the $484,350 established for the majority of the United States. These high-cost areas are locations where 115 percent of the local media home value exceeds the baseline conforming loan limit.
In these areas, the conforming loan limit will be 50% higher than the limit for one-unit properties elsewhere, raising it to $726,525 for 2019.
There are also special provisions made for conforming loan limits for areas outside of the continental US, such as Alaska, Hawaii, Guam and the US Virgin Islands, where the limit will be raised to $726,525 for 2019 as well.
Ready to purchase a home and wondering how to go about taking advantage of the new, higher conforming loan limits for 2019? Contact us today to find out how these changes may impact you.
Wondering what your mortgage options are in the state of New York? You can explore those here.