Great news for home buyers in the new year! The Government Sponsored Enterprise or GSE, which is also commonly referred to as Fannie Mae and Freddie Mac, publicly traded companies helping banks and lenders by purchasing conforming loans, have announced an increase to the low limit starting in 2017.
In the second quarter of 2016, the Federal Housing Finance Agencies price index was similar to the level of the index in 2007. Once the housing price index or HPI, reaches precrisis levels, the GSE can raise conforming loan limits. There are both standard loan limits and balance loan limits; the standard loan limit has been $417,000 and the high balance limit has been $625,500. The new loan limits will be $424,100 and $636,150. FHA-insured home equity conversion mortgages or reverse mortgages will also increase to $363,150.
These loan limits for forward mortgages increased in nearly 3000 counties which creates changed FHA’s floor and ceiling limits. This naturally means the bottom or minimum amount of loan and the maximum amount. The floor will increase to $275,665 from $271,050. This limit is set at 65% of the national conforming loan limit. The ceiling figure is 150% of the national conforming loan limit topping out at $363,150. This floor or minimum limit applies to areas where 115% of the median home price is less than 65% of the national conforming loan limit. The FHA determines these loan limits based on median home prices for a particular area. The loan limits will not decrease in any part of the country.
What this means to the general homebuyer is that more loans will fit into regular conforming loan limits they used to be high-balance. Plus, more loans that were required to fit into a jumbo loan will fit into a regular conventional or high balance loan.
This is a really positive change to our industry as these limits have not been increased since 2007. For more information or if you’d like to apply for a home loan and now starting January 1 you may qualify for a higher limit, contact my office today.