2019 Bigger and Better Loan Limits
Good News for Buyers in 2019: Loan Limit Increases
What do loan limit increases mean for buyers?
Want to buy a house next year? Based on a recent announcement from the Federal Housing Finance Agency (FHFA), the outlook is good! In November 2018, FHFA confirmed that it will raise loan limits as of January 1, 2019. For the majority of the population, this may not mean much, but for homebuyers, this could be the chance to get the right house in their price range.
“Conforming loans,” backed by Fannie Mae and Freddie Mac, typically come with lower interest rates than “non-conforming” and “jumbo” loans. The maximum loan amount allowed before a loan becomes a non-conforming loan will increase by 6.8 percent (from $453,100 in 2018 to $484,350 in 2019).
Why the increase?
For the 3rd year in a row, FHFA explains in a recent press release:
- Home values are rising, particularly in high-cost areas.
- Baseline and ceiling conforming loan limits must increase to accommodate.
- An FHFA map of the 2019 maximum loan limits throughout the U.S. can be found here.
The FHFA acknowledged at the end of November 2018 that housing prices are on the rise, leading to a necessary increase in the limits as well. As home prices increase, the maximum loan limit needs to increase with it so homebuyers can borrow enough to cover the cost of their new home purchase. The new limits set by the FHFA reflect the increase in home prices across the country, making it easier for more borrowers to qualify for financing.
New loan limits may make it easier to buy
These conforming loan changes mean that an extra $31,250 is available to the homebuyer who qualifies. Depending on the housing market, and especially where inventory is tight, this can give many buyers a leg up on the competition. It could also give them the ability to purchase a larger house in a different area or neighborhood they may not have been able to afford otherwise.
Jumbo (Non-conforming) vs. Conforming
Jumbo loans are often used if a home loan amount is too high to meet conforming loan limits. Depending on individual needs, qualifying for new conforming loan limits can have some advantages over jumbo loans, like:
- Lower down payment options that range from 3 to 5 percent.
- The opportunity to take out more home equity in a refinance, providing more cash for home renovation, college education, medical emergencies, and more.
- Lower credit requirements, in most cases, since lower loan limits incur less risk.
In designated “high-cost” areas, loan limits will be set higher. So if you live in a high-cost area, the conforming loan limits in your area will be higher, giving you more room to stay in “conforming territory.” These are housing markets where at least 115 percent of the local median home value exceeds the baseline conforming loan limit.
What to do next: 3 steps to take if you’re ready to buy
New loan limits, with an increase of $30,000, may open the door for you in 2019. Luckily, finding out if you’re eligible is easy:
- Fill out this short application.
- Submit your information and get preapproved quickly.
- Connect with a mortgage banker who can tell you how much house you can afford, guide you to your best loan option, and help you find a home in a price range you’re happy with.
Not ready to commit? Just have questions?
If you aren’t yet ready to start the process but still have questions about the home buying world, fill out the short form below or contact us, and we’ll have an experienced mortgage banker reach out to answer all of your mortgage questions.