2020 Conventional Loan Limits Increases To $510,400

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This ARTICLE On 2020 Conventional Loan Limits Increases To $510,400 Was PUBLISHED On December 2nd, 2019

Why 2020 Conventional Loan Limits Increases To $510,400

Gustan Cho Associates have some good news to bring our readers.

  • Similar to years prior, the Federal Housing Finance Agency (FHFA) has announced the maximum conforming loan limit will once again be raised for the calendar year of 2020
  • The increase is set for conforming loans that will be acquired by FANNIE MAE and FREDDIE MAC to be raised to $510,400
  • The loan limit for 2019 is $484,350, which was a nice increase from 2018 ($424,100)
  • In this blog, we will detail what the loan amount change means for you and why the loan amounts were raised

In this article, we will cover and discuss 2020 Conventional Loan Limits Increases To $510,400.

2020 Conventional Loan Limits Increases To $510,400 To Keep Up With Rising Home Prices

Raising the conforming loan limit is an important step for keeping homebuyers in the mortgage market with home prices on the rise across the nation.

  • According to the Federal Housing Finance Agency, the home prices in the United States rose in the third quarter of 2019, 1.1% (Measured in House Price Index (HPI)
  • 1.1% may not sound like a lot, but that is a significant jump for just a few months
  • Comparing the past 12 months, home prices rose a staggering 4.9%

That is calculated from quarter 3 of 2018 through quarter 3 of 2019.

Role Of The Federal Housing Finance Agency (FHFA)

What is Role Of The Federal Housing Finance Agency (FHFA)

The Federal Housing Finance Agency is the main source of house price indexes.

  • It is our nation’s only free public data source for Home Price Index data across all 50 states
  • They’ve been gathering this information since the mid-1970s
  • The home price indexes are built from tens of millions of home sales and offer insights into the housing in future home price models
  • According to William Doerner, an FHFA Supervisory Economist, “House prices have risen every quarter for the last 8 years”

He goes on to state that we are still in an upward trend of home prices however the price gains are starting to slow down their upward pace.

Reason For 2020 Conventional Loan Limits Increases To $510,400

What are Reason For 2020 Conventional Loan Limits Increases To $510,400

House prices rose across all 50 states and the District of Columbia between quarter 3 of 2018 and quarter 3 of 2019.

  • The top five states where the house price index rose were Idaho (11.6%), Maine (7.9%), Arizona (7.9%), Utah (7.8%), and Indiana (7.4%)
  • States showing the smallest appreciation where Illinois (1.9%), Connecticut (2.2%), Maryland (2.4%), South Dakota (2.7%), and Iowa (3.2%)
  • Certain cities in our nation such as Boise, Idaho saw home price values Rise by 11.1%! 
  • Other areas such as Camden, New Jersey we’re only increased by 0.7%

It is the job of the Federal Housing Finance Agency to weigh the ups and downs of the nation’s housing market to change loan limits accordingly. 

Data Released By The Federal Housing Finance Agency

What Data has been issued by the Federal Housing Financing Agency

The data furnished by the Federal Housing Finance Agency it’s very interesting. To view top 20 and bottom 20 metropolitan areas for quarter 3 of 2019, please click the following link:

TOP 20 and BOTTOM 20 HPI’s NATIONWIDE

  • If this data seems overwhelming, we will now break down what this loan amount increase means for you
  • Conforming mortgage guidelines are set by Freddie Mac and Fannie Mae
  • These two government-sponsored enterprises regulate the conventional mortgage market
  • Current indications show Freddie Mac and Fannie Mae will once again be privatized, which should expand mortgage lending programs
  • But for now, we must conform to their guideline standards
  • The Federal Housing Finance Agency is mandated by the Housing and Economic Recovery Act (HERA) to adjust the baseline conforming loan limit each year to reflect changes in average our home prices
  • On November 25th, 2019 FHFA published the third-quarter data showing the average increase in U.S. home price values
  • According to their data, house prices increased to 5.38% on average

The maximum conforming loan limits for the calendar year 2020 will increase by a similar percentage and are now capped at $510,400. 

High-Balance Conforming Loans In High-Cost Areas

What loans were granted in accordance with the principle of a high balance in high-cost areas

High-Cost Area Limits:

  • In many parts of our nation, the local median home value exceeds $510,400
  • These counties are considered HIGH-COST AREAS
  • To be considered a high-cost area, the median home value must exceed $586,960 (or exceed the local median home value by 115% or more)
  • Counties Across the Nation have higher loan limits
  • HERA establishes a maximum loan limit for all areas of the country called a ceiling

The ceiling is 150% of the Baseline loan limit. 

  • $510,400 * 150% = $765,600

These calculations are for ONE-UNIT properties. For a list by county and for two to four-unit dwelling loan limits please click this HIGH-COST LOAN LIMIT PDF

Benefits Of 2020 Conventional Loan Limits Increases To $510,400

What Will Benefits Of 2020 Conventional Loan Limits Increases To $ 510,400

What does the 2020 Conventional Loan Limits Increases To $510,400 mean for conforming borrowers?

  • The increased loan limits for the year 2020 will help thousands of Americans utilize a conforming mortgage to buy their property
  • A loan amount above the conforming loan limit falls into the JUMBO MORTGAGE category
  • Jumbo mortgages are amazing loan programs but are harder to qualify for
  • Many times, a jumbo mortgage will require significant cash reserves after closing
  • Jumbo loan products can require up to 18 months of cash reserves in order to qualify
  • When purchasing a $700,000 home, that amount can add up quickly
  • The increased loan limit will help potential home buyers buy a home within the Fannie Mae and Freddie Mac lending guidelines
  • The increased loan limits also apply to mortgage refinance is
  • In the calendar year of 2020, you may refinance your home based on the increased loan limits

For example, you may be able to cash out $26,050 more if you complete your Cash-out refinance transaction in the calendar year 2020. Please see our article for more information on CONVENTIONAL CASH OUT MORTGAGES

Rising Home Prices And Chances Of Housing Market Correction

What are the Rising Home Prices And Chances Of Housing Market Correction

While some experts argue the price of homes is increasing at an alarming rate, dooming us for another housing bubble, many other experts feel real estate is growing proportionally with the rest of the economy.  The Federal Housing Finance Agency has shown us pockets of the country that are growing quickly and others that are almost stagnant. If you and your family are looking to relocate, we suggest reading into this data. Gustan Cho Associates are available seven days a week for any mortgage-related questions. We offer FHA, Conventional, and VA mortgages without any LENDER OVERLAYS. Please call Mike Gracz on 630-659-7644 or email mgracz@gustancho.com to schedule a one-on-one mortgage consultation today.

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