FHFA ups borrowing limit for mortgages in 2018

Ryan Brinks 30 November 2017

FHFA bumps up limit for 2018 mortgages

More mortgage lenders are likely to approve bigger loans, up to $453,100, now that the Federal Housing Finance Agency has increased its conforming loan limit.

The FHFA’s loan limit is one of several guidelines that determine which loans are acceptable for government-backed Fannie Mae and Freddie Mac to buy and trade on the secondary housing market via mortgage-backed securities. Because they own trillions of dollars of mortgage assets, the organizations’ guidelines have a significant influence on mortgage terms across the country.

While each lender can implement different standards for its home loans, the increase from this year’s $424,100 limit to $453,100 in 2018 will make it much more likely that qualifying borrowers see an extra $29,000 in purchasing power.

The other FHFA guidelines cover acceptable loan-to-value ratios, debt-to-income ratios, creditworthiness and documentation. For a mortgage to be considered conforming, it must meet all of these guidelines.

This is only the second time since 2006 that the FHFA has increased the conforming loan limit, and the increase matches the 6.8% surge in average home values nationwide over the past year. The agency only considers changes to its guidelines once a year, after the conclusion of the third quarter.

However, FHFA guidelines are not applied the same everywhere in the U.S. In high-cost places where median home values are near or above the limit, borrowers may be eligible to buy a home worth as much as $679,650. Some notable high-cost locations include New York City, Washington DC, Denver, Salt Lake City and coastal California. And in 71 select counties, the new maximum loan size will not be higher than this year’s limit.

With more non-bank lender options to choose from and a more affordable housing market than 20 years ago, conditions are once again ripe for those looking to buy a home. See where in the US the most people are rushing to buy homes. Among many others, here are three reasons to buy a home right now.

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