December 4, 2017
Our brokers know that every year the Federal Housing Finance Agency (FHFA), which oversees conventional loan agencies Fannie Mae and Freddie Mac, has the right to change the maximum loan amounts for mortgages that the agencies will purchase from lenders. FHA usually follows these same loan limits, but as our brokers know it is a different program with different guidelines.
The announcement has come in that the new maximum loan limits for high cost areas (Los Angeles and Orange County) will be $453,100 for conventional mortgages and $679,650 for "high balance" mortgages. Note that most other Southern California counties have lower maximum limits.
By increasing the limits from last year, FHFA is acknowledging the increased housing prices across the country and making more families eligible for lower cost mortgages and somewhat easier guidelines.
Historically, high-balance conforming rates are higher than the conventional rates, typically 0.125% to 0.25%. Additionally, a conventional mortgage can have some guidelines that are easier to meet than the high-balance guidelines. With 20% down the higher loan limits increases the conventional purchase price from just over $533,000 to just over $566,000, making those purchasing in that $33,000 price band eligible for lower rates and perhaps slightly easier loan qualifying.
Orion’s experienced brokers also know that those purchasing higher end properties may also see some benefit. Loan amount above the high-balance limits generally fall into the "Jumbo" mortgage category, which typically entails tighter qualifying guidelines and depending on the market usually higher interest rates. The minimum sales price for the maximum Fannie/Freddie loan amount with 20% down payment will be increasing from just over $795,000 to almost $850,000 with the new loan limits.