Loan Limits Increase on Fannie Mae and Freddie Mac
Great news for homebuyers with Fannie Mae or Freddie Mac loans in 2020.
For four straight years, the FHFA (Federal Housing Finance Agency) has been increasing the conforming loan limits and in 2020 the loan limit will increase to $510,400 up from $484,350 in 2019. Prior to 2016, the Federal housing finance agency has not increased this loan limit for over a decade. But in 2016, the FHFA increased the Fannie Mae and Freddie Mac conforming loan limit for the first time in 10 years and ever since then the loan limit has gone up by about $93,000. It started back in 2016 with the loan limit that went from $417,000, again, which hasn't been changed in 10 years, to $424,100. The year after that, it was raised to $453,100, and up to $484,350 for 2019. Now, that loan limit into any 20 will top $510,000.
What is a conforming loan limit
These loan limits for Fannie and Freddie are determined by the housing and economic recovery act in 2008 when the subprime mortgage bust left a lot of Americans homeless, in foreclosure, or under a short sale. At that time, the baseline loan limit was top to $417,000 and after a period of price declines, the baseline loan limit cannot rise again until home prices return to the pre-decline levels.
Data shows that home prices on average across the nation have increased by 5.38% between the third 1:45 thousand 18 and the third 1:45 thousand 19, which means that the baseline maximum conforming loan limit will increase by the same percentage.
What does this mean for higher home price areas?
For areas in which 115% of the local median home value exceeds the baseline conforming loan limit the maximum loan limit will be higher than the baseline loan limit. Median home values generally increase in high cost areas driving up those maximum loan limits. The new ceiling low limit for one unit properties in high cost areas will be $765,600 or 150% of the existing loan limit of $510,400. In special places such as Alaska, Hawaii, Guam, and the US Virgin Islands, the baseline loan limit will be the higher amount of $765,600.
Each city and County have their own rules. In places like Los Angeles County and San Diego County, those loan limits are naturally higher because the median home value is relatively higher. In places like Columbus and the surrounding cities, will stick to the $510,400. This means that those with FHA loans or any government-backed loan through Fannie Mae or Freddie Mac can get a conforming loan up to this amount. This number is a general figure that encompasses the majority of single-family home buyers.
Other options may include jumbo loans, USDA loans, and conventional loans or interest-only loans depending on the type of house a home buyer wants, their income, and current financial state.
But, if you've been holding off buying a home in 2019, there's great news! You just may have qualified for more. [Source]