FHFA Increases Conforming Loan Limits On Conventional Loans
This ARTICLE OnFHFA Increases Conforming Loan Limits On Conventional Loans Was UPDATED And PUBLISHED On October 31st, 2018
Great News for Conventional Loan Borrowers.
- It is now official and was announced that the FHFA increases conforming loan limits for 2018
- This means that the cap for Conventional Mortgages is no longer $424,100
- The term of Jumbo Mortgages will no longer set the Jumbo Loan definition of any mortgages that is higher than $453,100
- Jumbo Loans will start with mortgages starting at $453,100
- Conventional Loans are called conforming loans
- This is because they need to conform to Fannie Mae and Freddie Mac conforming maximum loan limit of $453,100
- This is no longer the case because Fannie Mae and Freddie Mac will increase their maximum Conforming Loan Limits to $453,100 effective January 2018 under the orders of the Federal Housing Finance Agency, or FHFA
- FHA Increases Conforming Loan Limits For 2018 for high-cost areas from $636,150 to $679,500
- Many counties in California are considered high-cost areas
- Many California home buyers can definitely take advantage of the increase of Conforming Loan Limits for 2018
- This slight increase will definitely help home buyers
- Especially first time home buyers, due to escalating costs of homes
In this article, we will discuss and cover the FHFA raising loan limits on Conforming Loans due to rising home prices.
FHFA Increases Conforming Loan Limits On Conventional Loans Due To Single Family Homes In California Sky Rocketing
California has the highest-priced homes in the nation. California home buyers have been losing opportunities to higher home prices. The maximum loan limits on high cost/high balance counties throughout the state.
- Home prices in the third quarter in the state of California has exceeded their current level of 10 years ago
- It priced many would-be home buyers out of the housing market
- Now with FHFA Increases Conforming Loan Limits For 2018, this slight boost brings back home buyers who had to halt their home shopping and mortgage process
- Many hard-working Americans can afford the monthly housing payment
- But often see it challenging coming up with the down payment on a home purchase
- The term and definition of Jumbo Loans is finally changing for the first time in ten years
This because Jumbo Mortgages are now higher mortgages that are capped at $453,100 and not $424,100.
Fannie Mae And Freddie Mac
Fannie Mae and Freddie Mac are the two mortgage giants in the United States.
- Fannie Mae and Freddie Mac are private corporations and are called GSEs
- Government Sponsored Enterprises and sets the standards for Conventional Mortgages
- Banks and private mortgage lenders need to follow Fannie Mae and/or Freddie Mac mortgage lending guidelines if they want to sell the Conventional Loans they originate and fund to Fannie/Freddie
- That is why Conventional Loans are also called Conforming Loans
This is because they need to conform to Fannie Mae and/or Freddie Mac’s lending rules and guidelines.
FHFA Increases Conforming Loan Limits Effective Immediately
Effective January 2018, both Fannie Mae and Freddie Mac will be backing Conventional Mortgages that conform to their standards and does not exceed $453,100:
- The FHFA Increases Conforming Loan Limits For 2018 to $453,100 on most counties of the United States
- The FHFA Increases Conforming Loan Limits for 2018 to $679,500 on high-cost counties from the current Conforming Loan Limit
- FHFA Increases Conforming Loan Limits For 2018 will be a definite benefit for first time home buyers to enter the home purchase market
- This is because the down payment requirements and general credit requirements for Fannie Mae and/or Freddie Mac conforming mortgages are much easier to meet than the lending requirements for Jumbo Mortgages
The FHFA Increases Conforming Loan Limits For 2018 is the second increase on Conventional Loans since 2006.
Conforming Loans Versus Jumbo Mortgages
It is a known fact that the mortgage lending requirements on conforming loans are much looser than the lending requirements for Jumbo Mortgages.
Here are the advantages of conforming loans versus Jumbo Mortgages:
- Conventional Mortgages have minimum credit score requirements of 620 FICO credit scores versus 700 credit scores for Jumbo Mortgages
- Debt to Income Ratios on Conventional Mortgages are normally capped at 50% DTI for Fannie Mae and 50% DTI for Freddie Mac
- Debt to Income Ratios on Jumbo Mortgages depends on the individual Jumbo Lenders
- Most Jumbo Lenders have their debt to income ratios capped at 40% DTI while some may go as high as 43% DTI
- Down payment requirements on Conforming Loans are either 3% down payment for first time home buyers and 5% down payment for seasoned home buyers
- Most Jumbo Lenders require a 15% to 25% down payment
- Mortgage rates on Conforming Loans are substantially less than those of Jumbo Loans
- Jumbo Lenders will normally require reserves of 6 months of Principal, Interest, Taxes, and Insurance
Conforming Lenders will not require reserves unless it has been stated on the Automated Underwriting System.
Other Advantages Of Conforming Loans Versus Jumbo Mortgages
Conventional Loans offer much looser credit requirements than Jumbo Mortgages.
- Conventional Loans are called Conforming Loans
- This is because they need to conform to Fannie Mae and Freddie Mac mortgage lending guidelines
Although Conventional Loans are private loans originated and funded by banks and private mortgage lenders, these lenders do not want to hold them in house.
FHFA Increases Conforming Loan Limits Due To High Home Prices
Lenders want to package them up and resell them to Fannie Mae and Freddie Mac:
- This is so they can clear out their warehouse lines of credit and reuse their warehouse lines of credit to originate and fund more Conventional Loans
- However, in order for these lenders to be able to sell them to Fannie Mae and Freddie Mac, these loans need to conform to Fannie/Freddie lending guidelines
- If they do not, Fannie Mae and Freddie Mac will not buy them
- Lenders are stuck holding these loans in their portfolio
- Fannie Mae and Freddie Mac are private corporations owned by shareholders but are backed by the federal government
- This is the reason they call Fannie Mae and Freddie Mac government-sponsored enterprises, or GSEs
- Jumbo Mortgages do not have set Lending Guidelines
Each Jumbo Mortgage Lenders have their own Lending Requirements, unlike Conforming Loans.
FHFA Increases Conforming Loan Limits: Guidelines On Conforming Versus Jumbo Mortgages
Gustan Cho Associates are experts in both conforming and jumbo mortgages. Mortgage qualification requirements on Conventional Loans are much easier and looser than Jumbo Mortgages.
Here are the comparisons on mortgage lending qualification requirements on Conventional Versus Jumbo Loans:
- 4 year waiting period to qualify for Conventional Loans after bankruptcy, deed in lieu of foreclosure, and short sale
- 7 year waiting period after foreclosure to qualify for Conventional Loan
- Most Jumbo Lenders require a 7 year period after bankruptcy, deed in lieu of foreclosure, foreclosure, short sale
- Conforming Loans will go off DU/LP Findings per Automated Underwriting System, AUS
- Jumbo Mortgages will go by mortgage underwriter discretion
- Conforming Loans can be sold on the secondary market
- Jumbo Mortgages are normally portfolio loans.
Minimum credit scores for Conforming Loans are 620 FICO:
- Jumbo Lenders normally want 700 FICO. 740 FICO required for 10% down payment Jumbo Mortgages
Piggyback Mortgages of 80-15-5 permitted on Conventional Loans:
- CLTV can be up to 95% CLTV. Jumbo Loans, no Piggyback Mortgages are permitted
Non-QM Loans are becoming more and more popular. There are different types of NON-QM Loans.
- Bank Statement NON-QM Loans are normally for self-employed borrowers
- There are NON-QM Loans
- As long as you have 30% down payment and a 640 FICO Credit Score, there is no income verification/no tax returns required
- There are many NON-QM Loans where there are no waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale
- Jumbo Mortgages on a NON-QM Loan Program is becoming more and more popular
Gustan Cho Associates offers 95% LTV Jumbo Loans with no private mortgage insurance required.
If you have any questions on topics covered in this article or are interested in NON-QM Loan Programs or other creative Conforming and Non-Conforming Mortgage Loan Programs, please contact us at Gustan Cho Associates at 262-716-8151 or text for faster response. You can also email Gustan Cho at email@example.com . Gustan Cho Associates Mortgage Group are available 7 days a week, evenings, weekends, and holidays.