Rising home values are good news for many, but when you’re trying to buy a home that is just above a federal loan limit, it can be difficult. This is because most non-conforming interest rates are higher, causing a higher payment. And if you don’t have the extra cash on hand to increase your down payment and bring your loan down to the max limit, you might have to settle for a smaller home or one that’s in a less desirable neighborhood. However, with the new year comes new opportunities. We are pleased to announce Conforming and FHA loan limits are increasing as of January 1, 2020!
The new maximum conforming loan limit for single-family homes will be $510,400, a more than 5 percent increase from 2019’s $484,350, which brings the max FHA loan limit for single-family homes to $331,760. The new limits are effective for Cardinal Financial AZ loans locked on and after Friday, December 6, 2019.
Why the change? Rising home values prompted the Federal Housing Finance Agency (FHFA) to increase conforming loan limits in most of the country, including Arizona. As explained by former FHFA commissioner Ed Golding, “If house prices have gone up by 7 percent, then you need a 7 percent higher mortgage. It’s pretty automatic. Every time prices rise, the FHFA raises mortgage limits”.
So how does this effect you? Conforming loans (backed by Fannie Mae and Freddie Mac) make up the majority of the home loans issued in the U.S. As a buyer, an increase in loan limits allows you to shop within a housing market with rising values and prices. And because conforming loan rates are generally lower, this allows you to purchase that dream home with a more affordable monthly payment. These loan limits are just as important for sellers. Due to all of the above, higher loan limits allow your home to be available to a larger pool of potential buyers. Another popular loan is FHA because of its low down payment options (as low as 3.5%). FHA loan limits are set at 65% of conforming loan limits, so when conforming increases, so does FHA.
With higher loan limits and still low rates, 2020 is going to be a great year to buy. Give us a call today at 480-759-1500 to discuss your options!