High-Balance Conforming Loans in High-Cost Areas

In this blog, we will cover and discuss high-balance conforming loans for high-cost homebuyers. There are certain areas throughout the United States where it is considered high-cost areas. In high-cost areas, loan limits are higher than the traditional loan limits. The Federal Housing Finance Agency (FHFA) has increased the conventional loan limit to $766,550 for single-family homes for 2024.

In high-cost areas home prices are significantly higher than the national average. The FHFA allows for higher loan limits for conforming loans. These higher limits are high-cost area loan limits or high-balance conforming loan limits.

The FHFA has higher loan limits in high-cost counties. High-balance conforming loans, also known as conforming jumbo loans, are mortgage loans that exceed the standard conforming loan limits set by the Federal Housing Finance Agency (FHFA) but still meet the criteria for purchase by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. In the following paragraphs, we will cover some key points about high-balance conforming loans in high-cost areas.

Loan Limits on High-Balance Conforming Loans

The loan limits for high-balance conforming loans in high-cost areas are higher than the standard conforming loan limits. For example, in 2024, the standard conforming loan limit for most areas is $766,550, while the high-cost area limit can go up to $1,149,825 for single-family homes.

High-Cost Area Designation

The FHFA annually designates high-cost areas based on median home prices and other factors. These areas typically have higher median home prices compared to the national average.

Eligibility Criteria

To qualify as a high-balance conforming loan, the loan must meet the same eligibility criteria as a standard conforming loan, such as credit score requirements, debt-to-income ratios, and documentation requirements set by the GSEs.

Interest Rates on High-Balance Conforming Loans

Interest rates for high-balance conforming loans are typically higher than those for standard conforming loans due to the higher risk associated with larger loan amounts.

Down Payment Requirements on High-Balance Conforming Loans

High-balance conforming loans may require 3% to 20% down payment. However, since it is a high-balance conforming loans, there are loan-level pricing adjustments to the rate for lower credit score borrowers. Hombuyers may want to put a larger down payment to offset the increased risk for the lender.

Loan Limits Vary: The high-cost area loan limits can vary based on the specific county or metropolitan area, as determined by the FHFA.

High-balance conforming loans in high-cost areas allow borrowers to obtain financing for more expensive properties while benefiting from the generally lower interest rates and more lenient underwriting guidelines associated with conforming loans backed by Fannie Mae and Freddie Mac.

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2024 Loan Limit on High-Balance Conforming Loans For High-Cost Counties

Conventional loans in high-cost areas are called high-balance conforming loans. High-balance conforming loan limits for high-cost counties in the nation on single-family homes. High-balance conforming loans have increased to $1,149,825 for 2024 on single-family homes. In this blog, we will discuss High-Balance Conforming Loans and what constitutes High-Balance Conforming Loans.

Traditional Versus High-Balance Conforming Mortgages

Conventional Loans are called conforming loans. The reason being is conventional loans needs to conform to Fannie Mae or Freddie Mac Mortgage Guidelines. If conventional loans do not conform to Fannie or Freddie Guidelines, Fannie Mae or Freddie Mac will not buy them on the secondary market. Direct lenders use their warehouse lines of credit to fund conventional loans. Once the loan is funded, they sell the loan to the secondary market. With the proceeds, they replenish their warehouse lines of credit and repeat the process. The maximum conforming Fannie Mae and Freddie Mac Loan Limit is $766,550 for 2024. However, conforming loan limits are increased to $1,149,825 in high-cost areas.

What Are High-Balance Conforming Loans

High-Balance conforming loans are a higher loan limit than conventional loan caps in high-cost areas. Many counties in New Jersey, Pennsylvania, California, Colorado have high-cost areas as a designation. High-Balance conforming loans are available in all high-cost areas. Conforming loan limit cannot be exceeded on conventional loans. If the loan balance exceeds the conforming loan limit, it is classified as non-conforming loans or Jumbo Loans. High-Balance conforming loans are any conventional loans that exceed $776,550 do not surpass $1,149,825..

Refinancing Jumbo Mortgage To High-Balance Conforming Mortgages

Any home loan exceeding the conforming loan limits is considered nonconforming or jumbo loans. Jumbo loans are viewed as riskier loans by lenders. Therefore, Jumbo Mortgage Rates are higher than conventional mortgage rates. Many homeowners who have Jumbo Loans may have loan balances within High-Balance Conforming Mortgages and its loan limit. The FHFA increased conforming loan limits for the past three years due to rising home prices. Homeowners with Jumbo Loans should consider refinancing their Jumbo Loans to High-Balance Conforming Loans and see what type of net tangible benefit they can get. Non-conforming loans are not backed by Freddie Mac or Fannie Mae.

What Are Non-QM Jumbo Loans

Non-QM (Non-Qualified Mortgage) jumbo loans are a type of mortgage loan that falls outside the guidelines set by the CFPB for Qualified Mortgages (QM). These loans are often referred to as non-prime or non-conforming loans. In the following paragraphs, we will cover some key points about non-QM jumbo loans. Get Qualify for a Non-Qm loans, Click here

Loan Limit on Non-QM Jumbo Loans

Loan Amount on Non-QM jumbo loans normally exceed conforming loan limits set by the Federal Housing Finance Agency (FHFA). In most areas, this means loan amounts above $776,550 for a single-family home in 2024.

Borrower Qualifications on Non-QM Jumbo Loans

Non-QM jumbo loans are designed for mortgage applicants who most likely need to meet the strict underwriting criteria for QM loans, such as those with non-traditional income sources, self-employment, or credit blemishes.

Debt-to-Income Ratio (DTI) on Non-QM Jumbo Loans

Non-QM jumbo loans may allow for higher debt-to-income ratios than QM loans, which can benefit borrowers with higher income and debt levels.

Credit Score Requirements on Non-QM Jumbo Loans

Credit score requirements for non-QM jumbo loans can be more flexible than for QM loans, sometimes allowing borrowers with lower credit scores to qualify.

Documentation Requirements

Non-QM jumbo loans may have different documentation requirements than QM loans, such as alternative income verification methods or asset depletion calculations.

Interest Rates, Fees, and Down Payment on Non-Qualified Jumbo Loans

Non-QM jumbo loans generally have higher interest rates and fees than QM loans because they carry more risk for the lender.  Depending on the lender and the borrower’s qualifications, non-QM jumbo loans may require larger down payments, typically 20% or more, to offset the increased risk.

Non-QM jumbo loans are typically held in the lender’s portfolio rather than sold to government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac.

Non-QM jumbo loans provide an alternative financing option for borrowers who may not qualify for traditional QM loans due to their unique financial situations or income sources. However, these loans often come with higher interest rates and stricter underwriting guidelines to mitigate the increased risk for lenders.

NON-QM Loans Versus High-Balance Loans

NON-QM Loans are portfolio loan programs offered by Gustan Cho Associates. There are no waiting period requirements after bankruptcy and foreclosure on non-QM loans. Late payments in the past 12 months are allowed on non-QM loans. There is no private mortgage insurance premium required. Borrowers with credit scores down to 500 FICO can qualify.

Non-QM Jumbo Mortgages with No Maximum Loan Limit

The best part of non-QM mortgages is there are no maximum loan limits. Non-QM loans are not only for borrowers with bad credit. Many higher credit high-income borrowers benefit with non-QM mortgages. Self-employed borrowers can qualify for 12 months bank statement loan program with no income tax returns required. Down payment is normally 10% to 20% on non-QM loans versus 5% down on high-balance conforming loans. With high balance conforming loans, private mortgage insurance is required with higher than 80% LTV. Both High-Balance Loans and NON-QM Loans allow primary, second homes, 2 to 4 unit homes, and investment home financing.

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For more information in qualifying for high-balance mortgage loans or non-QM mortgages, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates Mortgage is available 7 days a week, evenings, weekends, and holidays.

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