This year, the Federal Housing Finance Agency (FHFA) will increase its conforming loan limits, which will eliminate the need for jumbo financing for more than 2 million homes, according to Zillow.
As a result of the FHFA’s raising the conforming loan limit to $1,089,300 in high-cost areas, many properties are now under the new limit. The fact that prospective buyers won’t have to apply for a jumbo loan could be good news since they won’t have to worry about the stricter credit criteria and fees that often accompany these mortgages. The minimum credit score for jumbo loans, for example, is typically 700, whereas conforming loans often require scores in the 600s. The minimum credit score for jumbo loans, for example, is typically 700, whereas conforming loans often require scores in the 600s.
Nicole Bachaud, senior economist at Zillow Home Loans said that with fewer homes on the market, the addition of 2 million conforming loan options across the country is good news for homebuyers. Due to a slowdown in home price appreciation, homes approaching jumbo loan territory will remain eligible for conforming loans longer than they were before.
It is important to note that this change only affects certain parts of the country, specifically 103 counties that have higher conforming loan caps than $1 million. A majority of these counties are located along the coast and in expensive metro areas of the Rocky Mountain region.
Conforming loan limits rose to $726,200 in most areas of the U.S., leaving expensive properties in these areas in the jumbo loan category.
According to Bachaud in order for buyers to make informed decisions about their home purchase and determine the best loan option for their personal financial situation, they should ask about their area’s loan limits and seek advice from qualified loan officers.