New FHFA Maximum Conforming Loan Limits for 2020
Posted by : Admin
The Federal Housing Finance Agency (FHFA) recently announced that maximum limits for conforming loan mortgages will increase in 2020. This is positive news for those who are thinking about purchasing a home in the new year. Since home prices are increasing, buyers who may have otherwise needed a jumbo loan to pay for their new property can now still qualify for a conforming mortgage loan.
Why are Conforming Loans Better?
Higher limits for one-unit conforming loans is especially helpful in “hot” geographical areas where property prices have risen sharply in the last year. This alleviates the challenge of securing a jumbo, or non-conforming loan, because they typically have stricter qualifications. Lenders view them as a riskier loan since they can’t be insured by Fannie Mae or Freddie Mac. Jumbo loans may have a higher credit score requirement, a larger down payment, a higher interest rate, and other additional requirements that are not necessary with a conforming loan.
What Are the New Conforming Loan Limits?
The loan limits, which were maxed at $453,100 in 2018 and $484,350 in 2019, are being increased to $510,400 for single-unit properties in 2020 by the FHFA. This change will be applied to mortgages that will be backed by Freddie Mac or Fannie Mae.
Why Did This Happen?
Rising home costs are driving the boost to the conforming loan limit for 2020. The increase is not a big surprise to the mortgage industry, because the Housing and Economic Recovery Act (HERA) dictates that baseline conforming loan limit must be adjusted every year. With the 2020 increase, the conforming loan limit has been raised four years in a row.
Are There Exceptions?
The short answer is yes — in some cases, in certain geographical locations. According to the FHFA website, “HERA establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a “ceiling” on that limit of 150 percent of the baseline loan limit.”
In areas where the real estate is higher than average – meaning 115% of the area’s home values exceed the baseline conforming loan limit – the conforming loan limit will be higher than the maximum loan limits on mortgages everywhere else in the United States. For these areas, the loan limit will be $765,600.
A list of every county and its corresponding maximum conforming loan limit was recently shared by FHFA. Only 43 U.S. counties will not increase to the new maximum.
Special provisions are in place for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. These are considered high-cost areas by HERA, so their maximum conforming loan limits for single-unit mortgage loans will also be $765,600.
Not Sure Which Loan Is Right for You? MIG Can Help
MIG offers a variety of conforming and non-conforming mortgage loans to our borrowers. Call us today to discuss which loan program best fits your needs.
