Loan limits to increase for conventional, FHA, and VA mortgages
Like an early Christmas present, Fannie Mae, Freddie Mac, FHA, and VA have all announced increased mortgage limits for South Carolina and the rest of the country. The increase will go into effect for all VA and conventional loans closed after January 1 and for all FHA loans with application dates after January 1. Mark Wells of Preferred Financial answers questions about the new loan limits.
Why were the loan limits increased for these programs? According to national statistics, median home prices increased between 5 and 10 percent across the country during the last year. Under guidelines adopted by Congress, all government-insured and government-sponsored mortgage programs must increase their loan limits to insure that borrowers have access to enough financing to purchase a median-priced home in their area.
Do the loan limits vary from county to county? For FHA loans, they do; for conventional and VA loans, there is a single limit that applies nationwide, with exceptions for higher limits made for areas in the country considered ‘high-cost areas.’
Does South Carolina have any high-cost areas? Not at the present time.
What will the new conventional loan limits be? We will see an increase from the present $424,100 limit to $453,100.
How about VA? VA uses the same loan limit as conventional loans for providing 100 percent financing, so their loan limit will also increase to $453,100. However, although it is not commonly known, VA will actually fund loans higher than their ‘loan limit’—they just will not finance 100 percent above that loan limit. If the purchase price of a home exceeds $453,100, they will finance $453,100 PLUS 75 percent of any amount over $453,100.
Is FHA the same as conventional? No, FHA has its own loan-limit calculation for each Metropolitan Statistical Area (MSA). The MSA for Greenville also includes most of the Upstate counties. The current FHA loan limit is $275,665 and that will increase to $294,515 for any FHA case number issued after January 1.
What do I do if I need a mortgage that exceeds these loan limits? There are any number of programs that offer options for financing up to $2.0 million. These loans are called ‘jumbo’ loans. They follow the general underwriting guidelines of conventional loans but usually require higher credit scores and more down payment.
All in all, the above changes mean that Upstate homebuyers and homeowners planning to refinance will have access to more funds to carry out their transactions.
I welcome questions and comments, and can be reached at (864) 235-9596, or by email at Mark@TheGreatestRates.com.
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