Loan-limit changes from Fannie Mae and Freddie Mac

Posted on Mar 1, 2017 in MARK WELLS' BLOG | Comments Off on Loan-limit changes from Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac have announced the first increase in the conforming loan limit since 2006. This will ultimately affect the maximum allowable loan limits on FHA and VA loans,
but the immediate effect will be on conventional loans.

When will the change take place?

The new limit will be in effect for all loans DELIVERED to Fannie Mae and Freddie Mac, after January 1, 2017. So if I already have a loan underway, I can use the new loan amounts as long as my loan closes after January 1? That is correct. The change is based on the loan closing date and not the loan application date. What will the new loan limit be? Currently, the limit is $417,000. As of January 1, it will rise to $424,100.

So if I already have a loan underway, I can use the new loan amounts as long as my loan closes after January 1?

That is correct. The change is based on the loan closing date and not the loan application date.

What will the new loan limit be?

Currently, the limit is $417,000. As of January 1, it will rise to $424,100.

I have a friend in California who was able to get a conventional loan for $625,000. Why are you saying the limit is only $424,100?

The loan limit established represents all  standard MSA areas (Metropolitan Statistical Areas), except those designated as “high-cost” areas. In high-cost areas, the conforming loan limit can be higher. Ultimately, each MSA limit it is determined by the median home price in that particular MSA. Why do you say this will also affect FHA and VA loan limits? VA has always followed Fannie and Freddie in establishing its maximum 100 percent loan amount, so it is expected that they will increase their limit to $424,100 shortly. (VA will lend above the 100 percent loan limit, but the veteran must put in down payment above that limit). FHA will eventually change also, since the force behind the change in the conforming loan limit was rising home prices across the nation. FHA uses the same statistical information to determine its county by county loan limit.

What is the current FHA loan limit for our area?

It currently stands at $271,050, but should rise to around $275,000 as soon as FHA acts on the new statistics.

Can I start an FHA or VA loan now and use the new loan limits once they are in place?

Unfortunately, both FHA and VA generally base their guideline changes effective as of the loan application date rather than the loan closing date. So you may have to wait a little while longer to use the new FHA and VA limits.

Mark welcomes questions or comments and can be reached at (864) 235-9596, or by email at Mark@TheGreatestRates.com.