The Federal Housing Finance Agency (FHFA) announced a new conforming loan limit increase of $98,950 this week. This brings the limit up to $647,200 from $548,250 in 2021.
It also opens avenues for many who might otherwise have a tough time in this hot housing market.
What is a Conforming Loan Limit?
A conforming loan limit is basically the maximum mortgage price that the FHFA will allow Freddie Mac and Fannie May to purchase. This is important because it draws the distinction between conforming loans and jumbo loans. Conforming loans are much easier to qualify for and do not require higher down payments and stricter credit score criteria.
They also come with much better rates.
What The Experts Say
Kim Clow, a Senior Mortgage Loan Officer at Bancorp South, is thrilled about the implications this carries for clients.
“These new limits open doors for those who might not qualify for jumbo money,” says Clow. “Clients now have more lenders, better rates, and lower down payments with this new limit. As we’ve seen home prices rise rapidly lately, especially in areas like Lakewood, this means more opportunities for people. It’s a very good thing and we’re all excited by it.”
What to Consider
Many buyers who are priced out of the market by skyrocketing housing prices will likely reconsider their options now. With the new conforming loan limit up 18 percent, it’s much easier to qualify for and afford mortgages in higher-priced areas. This could contribute to more competition, a push toward even higher prices, and an increase in home values.
These factors and market trends should be considered when considering a new mortgage. With a record-breaking leap in the conforming loan limit, we could see a shockwave of new buyers entering the market. While this is great news for sellers, it may further alienate buyers wary to sign higher mortgages.
In all, the new conforming loan limits make it easier to be a homebuyer in one red-hot market. And in today’s climate, we have to chalk this one up as a majority win. We will take them at any opportunity.
