The Federal Housing Finance Agency (FHFA) announced today the mortgage limit that will apply to conforming conventional loans in 2019. We’ll cut to the chase and tell you that they’re increasing to $484,350 for a one-unit property, an increase of 6.9% over the prior limit of $453,100. These limits will also apply to VA loans closing on or after January 1, 2019.
We’ll spend the rest of this post going over what this means if you’re in the market for a mortgage, whether it’s a purchase or refinance.
How Are Mortgage Limits Changing in 2019?
The $484,350 limit applies to single-family homes located in the lower 48 states. In Alaska and Hawaii, the limit is $726,525. The limits for one-unit properties in 165 high-cost counties will have their own loan limits set on a local basis which could be up to $726,525. The VA will follow the limits for one-unit properties.
You’ll also have a higher conforming loan limits for multi-family properties between two and four units.
- 2 units: $620,200 (up to $930,300 in high-cost areas)
- 3 units: $749,650 (up to $1,124,475 in high-cost areas)
- 4 units: $931,600 (up to $1,397,400 in high-cost areas)
When Do These Limits Apply to Your Mortgage?
The FHFA sets the limits for conforming conventional loans purchased by the government-sponsored entities Fannie Mae and Freddie Mac.
These limits don’t apply to FHA loans. In contrast to the nationwide limits for conventional and VA loans, these investors set limits on a county-by-county basis. USDA loans don’t have a defined limit.
Increased conforming loan limits puts more power into the consumers hands. It allows individuals who already own a home to take more cash out of their home’s equity. It also allows buyers to borrower a higher loan amount and in return bring less down, in some cases as little as 3% down. While that’s not an insignificant amount, it doesn’t have to be your life savings and you can reach your homeownership goal that much faster.
If you want to get a house that’s more expensive than the conforming loan limit in your area, you need a jumbo loan. Let’s briefly go over those next.
Conforming vs. Jumbo Loans
If you need a mortgage that goes beyond conforming limits, you’ll need a jumbo loan. Because of the bigger loan amount, you’re going to have to meet some additional requirements to mitigate against the increased risk taken on by the lender or investor in the mortgage.
Quicken Loans requires that most people who get a jumbo mortgage put down at least 10% for a down payment.
In addition to a higher down payment, you’ll need more reserves. Reserves are funds set aside, typically in a savings account, that are not used in the mortgage transaction. The amount is normally measured as a certain number of mortgage payments including principal, interest, property taxes, homeowners insurance and homeowners association dues, if applicable.
While it can vary depending on who is invested in your loan, a good guideline for homeowners looking to get a conforming loan is two months’ worth of reserves. However, if you’re getting a jumbo loan, you could be required to have anywhere between 0 – 18 months reserve payments depending on the loan amount, whether you’re a first-time home buyer and the size of your down payment. In many cases, jumbo loans will require more reserve funds than conforming loans.
Finally, jumbo loans often require additional documentation.
These guidelines apply to jumbo loans issued by Quicken Loans. Other lenders may have different policies.
These conforming loan limits are important because they generally are easier to qualify for then higher limit jumbo loan amounts. Because of this, the limits have a real impact on your buying power.
To take advantage of these limits today go ahead and apply for a mortgage with Quicken Loans! You can also give one of our Home Loan Experts a call at (800) 785-4788. If you have any questions, you can leave them for us in the comments section.
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