Dec 10, 2019
This is a guest post written by Dominic Svornich, Loan Consultant, and David Hulegaard, Loan Office Assistant from New American Funding.
For the fourth consecutive year, the Federal Housing Finance Agency (FHFA) will raise the maximum conforming loan limit in 2020. Effective January 1st, qualifying borrowers in more than 3,000 counties across the continuous United States, including all of Washington State, will be able to take out conventional mortgages underwritten through Fannie Mae or Freddie Mac for up to $510,400.
According to the FHFA’s data, home prices have increased an average of 5.38% over the last year. In Jefferson County, as you all know, that number is even higher, reaching 6.7% by Zillow’s assessment. According to the agency charters that allow Fannie Mae and Freddie Mac to purchase conventional mortgage loans from banks across the nation, conforming loan limits must reflect changes in home pricing across the U.S, which means they must increase as well. Additionally, in high cost areas, the law permits loan limits to be set 50% higher than the national baseline level.
Is this a good thing?
Yes and no. On one hand, the increased limits will help borrowers now qualify for conventional loans who may have been previously forced to consider a jumbo loan, which don’t always offer the most favorable financing.
On the other hand, however, an increase in loan limits also indicates that a rise in home prices is likely to continue across the country. And while that may be music to sellers’ ears, it does also carry the risk of potential homebuyers being priced out of the market in some areas, further contributing to the nation’s affordable housing crisis for lower- or moderate-income borrowers.
How will this change affect Jefferson County?
Jefferson County is indeed included in the upcoming rollout, and New American Funding is ready. We encourage anyone looking for more information about this change to reach out, and we’ll be more than happy to answer any questions. We look forward to assisting you with your mortgage lending needs!