Increase in Maximum Conforming Loan Limits
The FHFA recently raised the conforming loan limit from $417,000 to $424,100, marking the first increase since the year 2006. Since the baseline is increasing, the ceiling will also be increasing from $625,500 to $636,150. The raise in loan limits will apply to loans that are backed by Fannie Mae or Freddie Mac for one unit properties.
“The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit of $417,000 and requires this limit to be adjusted each year to reflect the changes in the national average home price,” read a statement from FHFA. This news is a good indication for the housing industry and it is a recognition of higher home prices that have returned to 2007 pre-decline levels.
Best of all, this raise in the loan limit will benefit consumers, as many will now be able to afford homes in higher priced areas of the country since they will have a better chance of qualifying for a Conventional loan. As a result, home buying for lower income families and first-time home buyers could become easier as the new limit changes will help lenders better address high costs and financial hurdles that might be standing in the way of those currently seeking home ownership.
This change will take effect on January 1st, 2017.