As home values rise, so do conforming loan limits. For the third straight year, the Federal Housing Finance Agency (FHFA) has increased the limits for mortgages backed by agencies that cover the vast majority of the home loans issued in the U.S.
In 2019, they’ll match last year’s percentage rise, with a 6.9 percent jump from $453,100 to $484,350 everywhere except for 47 counties in the U.S. In 2016, the first time limits rose in a decade, the rise was just 1.7 percent from $417,000 to $424,100. These new conforming loan limits will apply to loans delivered to Fannie Mae and Freddie Mac on or after January 1, 2019. We can start locking these rates as of Dec 3.
(Please note: FHA and VA 2019 loan limit updates are not yet available. An announcement of those changes will follow soon.)
What are conforming loan limits?
A conforming loan is one that adheres to rules set by housing finance agencies Fannie Mae, Freddie Mac and Ginnie Mae. More than 90 percent of mortgages are backed by these agencies, which makes these limits an important aspect of the home buying process.
The agencies set the size of the loans they are willing to back based on home prices in each area. This means as home prices rise, so will loan limits.
These limits are important to home buyers because they accommodate the rising home prices and allow them to borrow more to the limit of what’s called a conforming loan. A lift in the limits is a way for buyers to keep pace with a more-expensive market.
Home buyers who desire mortgages that exceed the conventional loan limit need a jumbo loan. Jumbo loans are privately-backed mortgages that typically have more stringent underwriting rules, such as excellent credit scores. Since jumbo loans are not backed by the big agencies, lenders assume full responsibility, which heightens their risk. There’s no limit to the amount of a jumbo loan, but it will depend on your credit history, assets, and employment history.
Bottom Line - With this increase in conventional loan sizes, buyers can more easily qualify with a conventional loan rather than a jumbo loan. Conventional guidelines tend to be less stringent than jumbo, require smaller down payments. If you have questions about lending, contact a member of the Charleston Luxury Group. We're happy to be your partner and put you in touch with a lender that will meet your unique needs. | 843-885-8519