Fannie Mae & Freddie Mac will now offer bigger home loans effective January 1, 2017! The Federal Housing Finance Agency (FHFA) has announced the new maximum loan limits for the United States. Conforming loan limits have not increased in 11 years because of the downturn and comeback of the real estate market. We have been lulled into $417,000 being the constant limit.
So What Does an Increase in the Conforming Loan Limit Do?
Most conventional loans are underwritten to Fannie Mae & Freddie Mac guidelines. Fannie and Freddie’s main goal is to offer affordable loans. Conversely, going above these limits puts a borrower into a jumbo loan category. Jumbo loans typically are more strict on borrower and property qualifications. Yet jumbo loans serve a great purpose as well. Over time, housing prices have increased so the limits had to increase eventually. Basically the increase allows 95% financing to a price just over $446,000! Also an 80% loan could go to $530,125! Borrowing against a duplex, triplex, or quadruplex even higher limits as you see below.
New 2017 Conforming Loan Limits
The following contains the general loan limits for the U.S.
New 2017 High Balance Conforming Loan Limits
The high cost area limits are set for each county.
Conventional Loan Strategies
There are many conventional strategies we use to help borrowers buy a home. Keep in mind that conforming loans allow as little as 3% down payment. Foremost, buyers may finance a primary residence, second home, or investment property. Furthermore, when buyers invest 20% or more down payment, there is no PMI required. This sizable down payment reduces risk to lenders. Therefore the insurance is not required. Additionally buyers even have the ability to pay their own taxes and insurance.
For buyers with less than 20% down payment, we provide key PMI strategies. PMI, private mortgage insurance,insures the lender against default. So this allows buyers to bring less than 20% to closing if desired. To start, we offer traditional monthly PMI which has lower up-front costs. Next, single premium PMI keeps a payment lower yet has more cost up-front. Like FHA loans, we have split premium PMI that is in between the first options. On conforming loans, PMI may be cancelled at a certain level. See when PMI cancels on conventional loans. Finally, lender paid PMI has a small increase in rate to cover the PMI which often lowers the house payment. Even though PMI works well, we can avoid PMI by offering a combo loan for well qualified buyers. These combine up to 95% but since the first mortgage is 80% or less, buyers avoid PMI and may even waive escrows.
Other Key Strategies
Not every scenario is cookie cutter. So there are some other outside the box ways of financing a home. For instance, a co-signor who will not live in the home is allowed with as little as 5% down. A non-occupying co-borrower is used to help buyers who lack sufficient income to qualify. Converting a current VA or FHA loan into a rental property loan is common. Refinancing a residence to a conventional rental property loan allows a buyer to use VA or FHA again for a new primary. Also there are times that using only 1 year of tax returns is needed. Conventional loans may allow for commission salespeople or self employed to qualify with only the most recent tax return.
Take advantage of these loan limit increases and call us today.