Thinking about buying a house in the next year? With different recent announcement from Fannie Mae, the outlook is nice. In November 2020, Fannie Mae confirmed that it'll raise loan limits as of January 1, 2020. The increase is significant: $30,000.
The maximum “conforming loans,” those backed by Fannie Mae and Freddie Mac that typically include lower interest rates than “non-conforming” and “jumbo” loans, increases limits from $424,100 in 2020 to $453,100 in 2020. That amounts to a brand new loan limit increase of 6.8 percent.
How much house can you afford to buy? Find out here.
New loan limits could make it simpler to buy
In 2020, Fannie Mae raised conforming loan limits for the first time since 2006 — even the very first time because the housing crisis hit. This new increase for 2020 will be the second begin loan limits, affecting most areas of the U.S. New limits affect mortgage loans that close on or after January 1, 2020.
Why the increase for the second year in a row? The Federal Housing Finance Agency (FHFA) explains inside a recent pr release:
- Home values are rising, specifically in high-cost areas.
- Baseline and ceiling conforming loan limits must increase to support.
- An FHFA map from the 2020 maximum loan limits throughout the U.S. are available here.
In designated “high-cost” areas, loan limits is going to be set higher. They are housing markets where a minimum of 115 percent from the local median home value exceeds the baseline conforming loan limit. Different loan limits, according to special statutory provisions, may be calculated for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
Maximum loan limit increases from Fannie Mae and Freddie Mac also will apply to multiunit properties, increasing to $580,150 for two-unit properties, $701,250 for three-unit properties, and $871,450 for four-unit properties.
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These changes may imply that up to $30,000 extra is available to the homebuyer who qualifies. With respect to the housing market, and particularly where inventory is tight, this could give many buyers a leg up on the competition — and the capability to buy a larger house in a different area or neighborhood they might not have access to been able to pay for otherwise.
Jumbo loans in many cases are used if your mortgage loan amount is too high to meet conforming loan limits. Based on individual needs, qualifying for brand new conforming loan limits might have some advantages over jumbo loans, like:
- Lower deposit options that vary from 3 to 5 percent.
- The opportunity to remove more home equity inside a refinance, providing more money for home rehabilitation, college education, medical emergencies, and much more.
- Lower credit requirements, in most cases, since lower loan limits incur less risk.
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What to do next: 3 steps to take if you’re prepared to buy
New loan limits, with additional $30,000, may open the doorway for you personally and your loved ones in 2020. Fortunately, finding out if you’re eligible is easy:
- Download our free app.
- Submit your information and get prequalified on the fly.
- Connect with a loan officer who are able to explain your choices, tell you just how much house you can afford, and help you find a house in a price range you’re pleased with.