The Federal Housing Finance Agency (FHFA) has announced that 2018 conforming loan limits will increase significantly. This will help more buyers with affordable financing at higher loan amounts. The surging home prices across the country have allowed loan limits to increase each of the last two years. Before the 2017 loan limit increase, it had been over ten years since the last increase. Most experts believe home prices are expected to climb even more. Therefore, buyers should consider further price increases plus the fact that interest rates are still historically low in their decision making.
The FHFA states, “As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2018 in all but 71 counties or county equivalents in the U.S.”
Conforming Loan Benefits
Conforming loans, also known as conventional loans, “conform” to Fannie Mae or Freddie Mac guidelines. A conforming loan offers low down payments for primary residence purchases or larger down payments if desired. These loans are typically used to purchase or refinance a primary, secondary, or rental property. With the 2018 conforming loan limits increase, it will allow more buyers in the top loan amount range to have access to affordable financing. Loans which exceed the conforming loan limits are called jumbo loans. The primary advantage of conforming loans compared to jumbo loans is conforming offers a lower down payment and often a better rate.
Although this article discusses larger size loans, conforming loans are great loans for lower loan sizes as well. As mentioned, there are low down payment loans which even allow the entire down payment to be a gift. Also, Fannie and Freddie Mac loans offer benefits such as leniency on student loans in Income-Based Repayment. This flexibility helps buyers qualify easier with lower debt to income ratios. Furthermore, borrowers with higher credit scores but lower down payment may save in mortgage insurance payments compared to FHA. Plus, conforming mortgage insurance may stop down the road, where FHA mortgage insurance continues for life unless 10% or more down payment. There are still plenty of other times where FHA is the better option.
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2018 Conforming Loan Limits
Now, keep in mind that the limits shown in the chart above are the standard loan limits. As shown in the chart, there are high balance levels as well, but these could vary based on the county. Increases in both levels will help properties priced over $400,000 throughout the country.
VA home loans typically follow the conforming announcement with matching loan amounts. So, expect VA to have the same limits. Additionally, the FHA loan limits should be expected to increase with this news of home prices surging. We will provide this information when available.