The Federal Housing Finance Agency (FHFA) recently increased the conforming loan limit from $484,350 in 2019 to $510,400 for 2020.
What is the Conforming Loan Limit?
The conforming loan limit is the largest mortgage amount Fannie Mae and Freddie Mac will purchase.
After your mortgage is finalized and you’ve signed off at the closing table, your lender will often sell the mortgage to a government-sponsored enterprise (GSE) like Fannie Mae or Freddie Mac. These companies are backed by the federal government, and they allow lenders to free up their funds so they can do more mortgage loans.
The loan limit is put in place by the Federal Housing Finance Agency (FHFA) and is based on an annual survey of housing price average increases and decreases.
What are the benefits of the New Conforming Loan Limit?
The loan limit has increased by nearly $20,000 – which means you can get a little more bang for your buck! A higher conforming loan limit allows you to purchase a more expensive home while remaining within Fannie Mae and Freddie Mac’s limits. This means loans up to $510,400 (and possibly more in some high-cost areas) can be funded with a conventional mortgage. Anything more than that would require a jumbo loan.
Jumbo loans are great options for those with high budgets, but they often require a larger down payment and higher credit requirements. Conventional loans, on the other hand, have a wider variety of requirements and they may be easier to qualify for. Plus, we offer conventional loan programs with no down payment required.
The increased loan limit could be good news for those with existing jumbo mortgage loans, too! If your current mortgage is considered jumbo, but is now within the conforming limits, you can refinance for a lower rate and possibly drop mortgage insurance premiums. Current borrowers also have the opportunity to potentially combine a first and second mortgage now that the conforming limit has increased.
Is 2020 the year you achieve your homeownership goals? Find a local home loan expert in your area today to get started! We’re here to help every step of the way.