For the third consecutive year, the Federal Housing Finance Agency (FHFA) increased loan limits for Fannie Mae and Freddie Mac backed mortgages.
The conforming loan limit will jump from $453,100 to $484,350. For high cost areas, like the Bay Area, the loan limit will increase from $679,650 to $726,525.
This equates to a 6.9 percent jump, the largest in the last three years.
Significance of the change
More than 90 percent of mortgages are backed by Fannie Mae, Freddie Mac, and Ginnie Mae. Increasing the loan limits allows for more homeowners to obtain a mortgage that is backed by one of these agencies, which generally have the most borrower friendly terms. In particular, home shoppers with a budget between $450,000 and $500,000, should reevaluate their pre-approval. You may now be able to qualify for a higher loan amount and at more attractive financing terms. The same is true for home shoppers with a budget between $700,000 and $800,000 in high cost areas, like the Bay Area.
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Refinance Opportunity
For homeowners that initially qualified for their mortgage with a high balance loan and now have a loan amount below $484,350, you may want to consider refinancing. This is because conforming loans have lower interest rates than high balance loans. Similarly, for homeowners that initially qualified for a non-conforming loan because the loan amount was above conforming loan limits, you can likely benefit from refinancing if your loan amount is below $726,525. This is because high balance conforming loans have lower interest rates than non-conforming loans such as a Jumbo loan.
The increase in conforming loan limits provides an opportunity to better your financial situation with a refinance.