The home prices in the USA have escalated immensely, therefore, the conforming loan limits for mortgages have been increased. The Federal Housing Finance Agency (FHFA) announced on 23rd November that the maximum limit of the conforming loan mortgages purchased from Fannie Mae and Freddie Mac have been increased. It comes as a shock to many people because the last time the conforming loan limits of the mortgage increased was ten years earlier back in 2006. Furthermore, the loan limits for higher costing area are also currently being revised.
For all the people who are curious about the new increased conforming loan limits, the general increments for counties in contiguous states, Puerto Rico and District of Columbia are mentioned below:
The principal balance for the year 2017 in counties located in the States of Alaska, Hawaii, Guam and the US Virgin Islands have also peaked to a new maximum. These new general loan limits are mentioned below:
The new conforming mortgage loan limits will be effective from 1st January 2017.
Federal Housing Administration (FHA) of the HUD determined the median house prices and based upon the estimation, the loans for the high cost areas have also been increased. The limits for loans in higher costing areas, the conforming mortgage loans are much higher than the baseline loans. The geographical location of the high-cost areas will determine the limits of the conforming loans. The maximum limits for the conforming loans in high-cost areas for Contiguous States, Puerto Rico and District of Columbia are mentioned below:
However, in Puerto Rico and vast number of states, there aren’t any high-cost areas in 2017.
In the State of Alaska, US Virgin Islands and Hawaii and Guam, new conforming home limits are as follows:
In a broader spectrum it can simply be stated that conforming loans are those that meet or conform to certain guidelines and criteria set by Fannie Mae and Freddie Mac, which are two reputable government funded enterprises (GSEs). These enterprises procure mortgages, bundles them and also securitize them. Later on, Fannie Mae and Freddie Mac sells these to investors through channels like Wall Street and other mediums. Therefore, if a loan meets the criteria set by the GSEs, it is called a conforming mortgage loan. Conforming loans are also known as conventional loans.
From the point of view of the borrower, the most important criteria that sets the conforming loans apart from other types of mortgages is the size. But, there are other standards as well such as, credit scores, private mortgage insurance, documentation related to the income and assets, debt to income ratios and down payment that make up the requirements for acquiring conforming loans.
Traditionally, the conforming loans boast higher rates at lower costs and a better flexibility when it comes to purchasing houses. These loans can be used to buy homes for the first time, second homes and can also be used to finance rental properties. It is also possible to acquire conforming loans after a recent bankruptcy but the debtor will have to prove that credit score has been re-established.