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. In December, the Veterans Administration announced that the 2019 VA loan limits will be increased to match the FHFA conforming loan limits. These new loan limits are effective immediately, but loans using the new limits must close on or after January 1, 2019.
This change will increase the maximum VA and conforming loan limit for one-unit properties to $484,350, up from 2018’s loan limit of $453,100.
This is the third 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!
The VA loan limits apply to military buyers only – meaning only those who have served or who are currently serving in a branch of the United States military can take advantage of it.
The limit increase is intended to assist military borrowers in more expensive loan markets to borrow more without having to put any money down on their home.
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 limits for 2019 were increased by the same percentage for the coming year.
In specific high-cost areas throughout the US, the VA and 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 loan limits 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.
If you’re shopping your mortgage options, you may be wondering how loan limits are changing for other types of home loans in 2019.
Besides the loan limit increases for FHFA conforming loans and VA loans, FHA loan limits will also increase as of January 1, 2019. You can get all the details about the changes being made to the FHA loan limits in 2019 here.
Ready to purchase a home and wondering how to go about taking advantage of the new, higher VA or 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.