Mortgage Loan Limits Raised for 2019
Nov 29th, 2018 @ 9:36 PM by Amber Nelson
In response to the rise in home prices this year, the Federal Housing Finance Agency is increasing loan limits on conforming mortgage loans for 2019.
The new maximum conforming loan limit will be $484,350, a 6.9% jump from 2018’s limit of $453,100. The increase roughly matches the rate of home price inflation – according to Zillow’s Home Value Index, home prices have risen 7.7% over the past year.
Conforming loans are those that qualify for guarantees from government-sponsored enterprises Fannie Mae and Freddie Mac. These government-backed loans often include better rates and terms than other mortgages, allowing more potential buyers a foot in the housing market. Fannie and Freddie also have better terms than even FHA loans, making them a very popular financing options for those who qualify.
There are even higher loan limits for some of the country’s most expensive real estate markets. In those areas, the limit is up to 150% of the normal limit depending on the median home price. That means that in 2019 markets like San Francisco and New York City could have limits of up to $726,525. For those applying for loans above the area loan limit, they will have to get so-called jumbo loans. According to Zillow, there are only about 6% of the nation’s homes that would fall into that category, but in those pricier areas of the country almost all homes qualify for jumbo loan status. In San Mateo county, California, for example, 86% of all properties are valued above the new $484,350 loan limit.
These higher loan limits are intended to make it easier for lenders to make loans, creating more credit for would-be home buyers. Of course, the danger of raising the loan limits is that taxpayers are on the hook for more money if there is another housing crash or even if more borrowers start defaulting on their mortgages. Fannie and Freddie currently guarantee between 40% and 50% of all new home loans.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.