BOULDER – Recently the FHFA announced that they are raising the 2018 maximum conforming loan limits. As a result, Fannie Mae and Freddie Mac’s baseline limit will go up to $453,100. But what does this really mean for home buyers?
The present maximum conforming loan limit for one-unit properties is $424,100; next year, we’ll see an almost $30,000 bump.
This is in sync with the Housing and Economic Recovery Act (HERA), an act that requires baseline conforming loan limits to be adjusted each year in order to reflect the current housing trends. They estimate a fair limit by examining average home prices. Between the third quarters in 2016 and 2017, home prices increased 6.8%. Therefore, the maximum conforming loan limits will increase by a comparable percentage.
The US housing market remains hot and the increase in this baseline loan limit reflects this: the maximum conforming loan limit will be higher in all but 71 of the nation’s counties.
In certain areas, the maximum loan limits will be even higher. This is limited to areas where the local home values exceed 115% of the baseline conforming loan limit. To establish the limits for high-price areas, HERA uses median home prices while also establishing a ceiling of 150% (the baseline loan limit). For home buyers living in these areas, the ceiling loan limit will be $679,650.
One of the reasons this is important is that it will allow some borrowers to avoid Jumbo loans – this allows first time buyers to put down as little as 3% on purchase prices of up to $477,000.
High balance loan limits are also increasing. In Colorado, they’re increasing as follows: Boulder County ($578,450) and Adams, Arapaho, Denver, Douglas, Jefferson counties ($529,000). This allows borrowers to put down 5% and avoid jumbo loans. In Boulder, this applies to the purchase of homes up to $608,900; in the other counties, it allows for the purchase of homes up to $556,900.
By Michaela Phillips, Guaranteed Rate, Inc. Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail [email protected] or visit michaelaphillips.com. NMLS:312874.