FHFA Increases Conforming Loan Limits For 2017
FHFA Increases Conforming Loan Limits For 2017
Great News for Conventional Loan Borrowers.
- It is now official and was announced that the FHFA increases conforming loan limits for 2017, which means that the cap for Conventional Mortgages is no longer $417,000.
- The term of Jumbo Mortgages will no longer set the Jumbo Loan definition of any mortgages that is higher than $417,000.
- Jumbo Loans will start with mortgages starting at $424,100.
- Conventional Loans are called conforming loans because they need to conform to Fannie Mae and Freddie Mac conforming maximum loan limit of $417,000.
- This is no longer the case because Fannie Mae and Freddie Mac will increase their maximum Conforming Loan Limits to $424,100 effective May 2017 under the orders of the Federal Housing Finance Agency, or FHFA.
- FHA Increases Conforming Loan Limits For 2017 for high cost areas from $625,500 to $636,150.
- Many counties in California is considered high cost areas where many California home buyers can definitely take advantage of the increase of Conforming Loan Limits for 2017.
- This slight increase will definitely help home buyers, especially first time home buyers, due to escalating costs of homes.
Single Family Homes In California Sky Rockets Third Quarter 2016
California has the highest priced homes in the nation and California home buyers have been losing opportunities to higher home prices and 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 where it priced many would be home buyers out of the housing market.
- Now with FHFA Increases Conforming Loan Limits For 2017, 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 because Jumbo Mortgages are now higher mortgages that is capped at $436,100 and not $417,000.
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 because they need to conform to Fannie Mae and/or Freddie Mac’s lending rules and guidelines.
- Effective May 2017, both Fannie Mae and Freddie Mac will be backing Conventional Mortgages that conform to their standards and does not exceed $424,100.
- The current Conforming Loan Limits is capped at $417,000. The FHFA Increases Conforming Loan Limits For 2017 to $424,100 on most counties of the United States.
- The FHFA Increases Conforming Loan Limits for 2017 to $636,150 on high cost counties from the current Conforming Loan Limit of $625,500.
- FHFA Increases Conforming Loan Limits For 2017 will be a definite benefit for first time home buyers to enter the home purchase market 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 2017 is the first 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 more 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 at least a 700 FICO credit scores for Jumbo Mortgages
- Debt to Income Ratios on Conventional Mortgages are normally capped at 45% 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 Lenders.
- Jumbo Lenders will normally require reserves of 6 months of Principal, Interest, Taxes, and Insurance while 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 offers much looser credit requirements than Jumbo Mortgages.
- Conventional Loans are called Conforming Loans 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 and want to package them up and resell them to Fannie Mae and Freddie Mac 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 and if they do not, Fannie Mae and Freddie Mac will not buy them and these 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 Jumbo Mortgage Lending Guidelines and each Jumbo Mortgage Lenders have their own Jumbo Lending Requirements unlike Conforming Loans.
Mortgage Guidelines On Conforming Loans Versus Jumbo Mortgages
The Gustan Cho Team at CrossCountry Mortgage are experts in both conforming and jumbo mortgages. Mortgage qualification requirements on Conventional Loans are much more 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 where the 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 where as long as you have 30% down payment and a 640 FICO Credit Score, there are 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.
If you have any questions on topics covered on this article or are interested in NON-QM Loan Programs or other creative Conforming and Non-Conforming Mortgage Loan Programs, please contact Gustan Cho at The Gustan Cho Team at CrossCountry Mortgage at 262-716-8151 or text for faster response. You can also email Gustan Cho at firstname.lastname@example.org . Gustan Cho NMLS 873293 and The Gustan Cho Team at CrossCountry Mortgage is available 7 days a week, evenings, weekends, and holidays.