For the third year in a row, the Federal Housing Finance Agency (FHFA) has raised the conforming loan limits. Conforming, otherwise known as conventional mortgages, are underwritten to Fannie Mae or Freddie Mac guidelines. Each year FHFA considers adjusting limits to reflect the average home prices across the country. Because of increased home prices in 2018, conforming loan limits 2019 increased by a whopping $31,250. This means the new limit for most one-unit properties is $484,350 compared to $453,100 during 2018.
Conforming Loan Limits 2019 Explained
Every loan type has a maximum lending limit which is set by its respective agency. For instance, FHA loans have county loan limits which are lower than conforming loans. Then, VA loans actually mirror conforming loan limits. Finally, jumbo loans take over where conforming loans stop. As mentioned above, most of the U.S. conforming limits for 2019 will start at $484,350. It is much higher for multifamily properties as well as higher cost counties.
Conforming Loan Limits 2019 1 – 4 Unit Housing in Contiguous U.S.
|Units||Conforming Loan Limits 2019||High Balance Conforming Loan Limits 2019|
Which Loans Are Affected by the Conforming Loan Limit Increase?
Conforming loans are the broadest spectrum of mortgages creating affordable homeownership. Although, there are other wonderful home loans like USDA, VA, and FHA, conforming loans open all kinds of possibilities. This change not only provides additional financing for primary residences, but it also helps second home and investment property loans.
In addition to the traditional 5%, 20%, or more down payment conforming programs, it is key to remember other awesome offerings. This loan increase enhances the following programs:
As home prices have continued to increase in many markets during 2018, the loan limits need to keep up. Because of the 2019 loan limit increase, more buyers and homeowners are able to use these great Fannie and Freddie loan programs. If the loan limits did not increase, it would force buyers and owners in this range to choose less flexible jumbo loan products.
Forget the Boring, Traditional Conforming Loans!
Many still think of conforming loans as the traditional, inflexible, not so exciting 20% down payment purchase loans. Not today’s Fannie and Freddie. We are talking home financing solutions for popular issues and wants that buyers have today such as:
Conforming Loan Guidelines Provide Solutions
As you can tell by this list, things have changed over the years for the better in conventional lending. In addition to rising home prices, the most popular home ownership hurdles buyers face these days are down payment and debt to income ratio requirements. Well, today’s conforming loans have solutions. Just think, buying a home with just 3% down payment. Plus, that can be a gift which means potentially getting into a home with none of the buyer’s own funds!
Furthermore, the total U.S. student loan debt surpassed 1.5 trillion dollars in 2018. This certainly puts restrictions on prospective home buyers. Income-based repayment is a very popular student loan payment plan. Typically, the required payment related to the balance is very low. Even student loan balances as high as $100,000 could have a $0 per month payment. Where FHA and USDA still require lenders to use 1% of the balance for a payment, conforming loans provide much more flexibility. Fannie Mae loans allow down to $0 payments on IBR payments. Freddie Mac allows down to $1 IBR payments. They have other creative student loan solutions too.
Then, there are countless types of income scenarios. Some make it tougher to qualify. Commission and self-employment are good examples, but there are ways for many borrowers to qualify with less than 2 years documentation. It is even possible for a borrower with no documentable income to buy with a co-signor. The co-signor doesn’t even need to live in the home. This is called a non-occupying co-borrower, which can be helpful.
Conforming vs High Balance Conforming vs Jumbo Loans
Every county in the U.S. and its territories has a conforming loan limit, but some of these counties are considered high-cost areas. High-cost areas mean higher home prices, so Fannie, Freddie, and other agencies provide expanded loan levels to account for the higher prices. These expanded loan levels are called high balance conforming loans. For instance, notice the huge difference in loan limits for a one-unit home. $726,525 vs $484,350 is a $242,175 difference. That is a big advantage to borrow that much more at conforming rates when buying in one of the higher cost counties.
In the chart above, it shows the conforming loan limits 2019 as well as the 2019 high balance conforming loan limits. Usually, the interest rates for these loans are the same or close to the normal conforming loan counties.
Once the conforming or high balance threshold is exceeded by even $1, it crosses into the realm of jumbo loans. Also known as nonconforming loans (do not mistake “nonconforming” for the old B/C, bad credit loans). Jumbo loans offer excellent terms as well, but they just do not typically provide options like 3% down, renovation loans, 50% debt ratios, or creative solutions for student loans, etc., but they will finance a primary, secondary, or even rental property at historically aggressive terms and rates. Another jumbo option for military or military Veterans is a VA jumbo loan, which is an excellent tool for buying a higher end primary residence.
Is a Conforming Loan Right For You?
There’s probably more to conforming loans than you originally thought, but don’t forget about the traditional stuff! Higher down payments, waiving escrows, high credit scores, PMI cancellation, and more work within conforming loan limits 2019. Even though we are talking about the high end of the conforming limits, keep in mind that this is a great option for smaller loan sizes as well.
If you have questions or scenarios that you want to discuss, contact us now. We love helping buyers take advantage of this and other wonderful programs.