After not increasing the maximum conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac for 10 years, the Federal Housing Finance Agency has now increased the conforming loan limit for the third straight year.
The FHFA announced on 11/27 that it is increasing the conforming loan limit for Fannie and Freddie mortgages in nearly every part of the U.S.
According the FHFA, the conforming loan limits will rise from this year’s total of $453,100 to $484,350 for 2019. That’s an increase of 6.9% from the current year’s loan limit to next year’s.
The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.
But, as the FHFA noted, home prices are still on the rise, which necessitates a third straight yearly increase in the conforming loan limit.
The FHFA’s third quarter 2018 House Price Index report, which includes estimates for the increase in the average U.S. home value over the last four quarters, showed that home prices increased 6.9%, on average, between the third quarters of 2017 and 2018. Therefore, the maximum conforming loan limit in 2019 will increase by the same percentage to $484,350.
Loan limits will also be increasing in what the FHFA calls “high-cost areas". For a county-by-county breakdown of the 2019 conforming loan limits, click here.
What Does This Mean For Homebuyers?
Jumbo loan products are used if the loan amount is too high to qualify to meet conforming loan limits. Not only do jumbo loans typically require a higher down payment, carry a higher interest rate, and have much more stringent guidelines to follow, but Fannie Mae and Freddie Mac are only allowed to purchase loans that match conforming guidelines. An increase in conforming loan limits means it will be possible to secure an even larger home loan, and still conform to federal loan guidelines.
Especially where inventory is tight, this can give many buyers a leg up on the competition, and the ability to purchase a larger house in a different area or neighborhood they may not have been able to afford otherwise.
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