As we enter 2024, prospective homebuyers are facing challenges including relatively stable housing prices and an ongoing shortage of housing inventory compared to demand. Although mortgage rates have decreased recently, according to the Federal Housing Finance Agency (FHFA), the average home prices in the U.S. increased by 4.6 percent from July 2022 to July 2023. Consequently, in response to this rise in property values, the FHFA has declared an increase in the maximum baseline conforming loan limits for Fannie Mae and Freddie Mac-acquired mortgages for home loans in Colorado for the year 2024, as outlined below:
Some Colorado counties are designated as higher-priced counties that have higher conforming loan limits. For example, Boulder County has confirming limits as follows:
With the median sale price of a home in Boulder County at about $870,000, as of December 2023, the new conforming loan limits should help affordability for homeownership.
When a home loan larger than a conforming loan is needed, a homebuyer can seek what is commonly known as a “jumbo loan”. The interest rate and credit score requirements might be higher than those of conforming loans, however, there are many jumbo loan options including those requiring lower down payments, and higher debt-to-income ratios, helping with affordability at higher price ranges.
Another strategy that might be available to help homebuyers who need a loan that is just over the conforming loan limit is to apply for both a first and a second mortgage. This involves qualifying for a first mortgage at the conforming loan amount and a second mortgage to make up the difference between the available down payment and the conforming loan limit. Your licensed mortgage loan officer can help you determine if this option is available for you.
Federal Housing Administration (FHA) Loan Limits also increase in 2024
Homebuyers who qualify for FHA loans will also get the benefit of the new higher loan limits. In Boulder County, the loan limits will be the same as the Fannie Mae/Freddie Mac limits above.
Interest rates boost purchasing power the most
Interest rates are still elevated from last spring, but we have seen recent drops from their highs. Interest rates are down around 1% point from the media headlines of 8% and seem to be falling, albeit slowly. As rates decline, purchasing power increases. According to Jodi Showman with CMG Home Loans, purchasing power increases about 2.6% with each .25% rate reduction. We may be at a tipping point for interest rates, seeing a slow decline throughout 2024.
Waiting for rates to drop to make your home purchase may not be the right financial approach, however. Although home prices are not increasing at the rapid pace of the past two years, appreciation is still at about 6% annually. When rates go down, the pace of home appreciation should increase, making home purchasing more expensive.
There are many ways to purchase a home now and get interest rates lower than the market rate with options such as temporary and permanent rate buy downs. In many cases, these buydowns can be worked into the purchase price using seller concessions to keep payment more affordable. Also, with special programs, like CMG Home Loans “Rate Rebound”, offering to refinance at no or very low cost, lowering the interest rate on your mortgage will be at very little expense when rates drop.
It is incredibly tough to “outsave” an appreciating real estate market. By that, I mean the pace of home price escalation exceeds a homebuyer’s ability to save for a down payment. Therefore, it makes sense to get started in the real estate market as soon as you can. Contact your Realtor and a mortgage lending professional to determine what current financing options are available to help you become a homebuyer – and in turn a homeowner – as soon as possible.
By Duane Duggan. Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail [email protected],
call 303.441.5611 or visit boulderco.com.