Updated Dec. 8, 2017.
Thinking about buying a house in the next year? Based on a recent announcement from Fannie Mae, the outlook is good. In November 2017, Fannie Mae confirmed that it will raise loan limits as of January 1, 2018. The increase is significant: $30,000. In December 2017, The Department of Housing and Urban Development (HUD) also announced that FHA loan limits will increase for 2018 in 90 percent of U.S. counties.
The maximum “conforming loans,” those backed by Fannie Mae and Freddie Mac that typically come with lower interest rates than “non-conforming” and “jumbo” loans, will increase limits from $424,100 in 2017 to $453,100 in 2018. That amounts to a new loan limit increase of 6.8 percent.
The new FHA loan increases for 2018 brings them to similar levels as Fannie Mae and Freddie Mac loans, with the loan limit also set at a 6.8 percent increase and in line with rising housing prices. FHA loan limits in high-cost areas will increase from $636,150 to $679,650. FHA loan limits in lower-cost areas will also increase from $275,665 to $294,515, with FHA limit increases in more than 3,000 U.S. counties. 82 percent of the counties in the U.S. are considered “lower-cost” within these FHA guidelines.
The FHA also announced that they will no longer insure mortgages with PACE loans as of January 6, 2018, a widely debated loan product used to fund solar panels and other energy-efficient home improvements.
How much house can you afford to buy? Find out here.
New loan limits may make it easier to buy
In 2016, Fannie Mae raised conforming loan limits for the first time since 2006 — also the first time since the housing crisis hit. This new increase for 2018 will be the second jump in loan limits, affecting most parts of the U.S. New limits apply to home loans that close on or after January 1, 2018.
Why the increase for the second year in a row? The Federal Housing Finance Agency (FHFA) explains in a recent press release:
- Home values are rising, particularly in high-cost areas.
- Baseline and ceiling conforming loan limits must increase to accommodate.
- An FHFA map of the 2018 maximum loan limits throughout the U.S. can be found here.
In designated “high-cost” areas, loan limits will be set higher. These are housing markets where at least 115 percent of the local median home value exceeds the baseline conforming loan limit. Different loan limits, based on special statutory provisions, may be calculated for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
Maximum loan limit increases from Fannie Mae and Freddie Mac will also apply to multiunit properties, increasing to $580,150 for two-unit properties, $701,250 for three-unit properties, and $871,450 for four-unit properties.
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These conforming loan changes may mean that up to $30,000 extra is available to the homebuyer who qualifies. Depending on the housing market, and especially where inventory is tight, this can give many buyers a leg up on the competition — and the ability to purchase a larger house in a different area or neighborhood they may not have been able to afford otherwise. Changes to the FHA loan limits may make it easier to buy more house with the lower credit requirements and low down payment perks associated with FHA loans.
Jumbo loans are often used if a home loan amount is too high to meet conforming loan limits. Depending on individual needs, qualifying for new conforming loan limits can have some advantages over jumbo loans, like:
- Lower down payment options that range from 3 to 5 percent.
- The opportunity to take out more home equity in a refinance, providing more cash for home renovation, college education, medical emergencies, and more.
- Lower credit requirements, in most cases, since lower loan limits incur less risk.
A mortgage lender who doesn’t treat you like a number? You can find a friendly Cornerstone loan officer in 40 states.
What to do next: 3 steps to take if you’re ready to buy
New loan limits, with an increase of $30,000, may open the door for you and your family in 2018. Fortunately, finding out if you’re eligible is easy:
- Download our free app.
- Submit your information and get prequalified on the fly.
- Connect with a loan officer who can explain your options, tell you how much house you can afford, and help you find a home in a price range you’re happy with.
For educational purposes only. Please contact a qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.