From the title of the blog, some of you may be jumping up and down with excitement over the news that conforming loans limits are going up which we know means more purchasing power to the borrower aka you! But for those of you who are sitting there going, sounds great, but what exactly is a conforming loan and what does it have to do with me, let me explain.
A conforming loan is a mortgage loan that conforms to GSE guidelines (GSE is Fannie Mae and Freddie Mac). The most well-known guideline is the size of the loan, which for this past year the limit was around $424,100 for single family homes in the US (even though it could vary in certain areas). So, the limit is how much can actually be borrowed and coming in 2018, loan limits are going to go up which means a lot of good things for borrowers.
Investopedia describes conforming loan limits as the following: The limit on the size of a mortgage which Fannie Mae and Freddie Mac will purchase and/or guarantee. The conforming loan limit is set annually by Fannie Mae's and Freddie Mac's federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO uses the October to October percentage increase/decrease in the average house price in the monthly interest rate survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the subsequent year.
What does this mean for a Borrower? More purchasing power! Mortgages, which exceed the conforming loan limit, are known as jumbo mortgages. The interest rate on jumbo mortgages can be higher than the interest rate on conforming mortgages. A borrower whose mortgage amount slightly exceeds the conforming loan limit should analyze the economics of reducing their loan size through a larger down payment or possibly using secondary financing to qualify for a conforming mortgage verses a jumbo mortgage.
The new base limit for single family homes in the continental US is $453,100 but her are the limits for the different cities and counties in/around the Denver area:
Adams County $529,000
Jefferson County $529,000
Douglas County $529,000
So that makes for some exciting times for borrowers next year! If you were thinking it is time to buy in the market, there is no better time then the present. With interest rates still low and now the conforming loan limits going up, you have much more purchasing power and that is an exciting thing. Contact me today and let’s grab coffee and chat about your loan options and how we can get you the house you want in the New Year!