We are now full throttle into the holiday season and the often-used word “hope” is all around us.
It is written in greeting cards, emails and of course voiced during hugs or handshakes with family, friends or whomever.
I know “hope” is also expressed at other times too, such as when it’s your birthday or for sending well wishes, but at this point it’s all about hoping you survive the holiday crunch and successfully transitioning into the new year.
On that note, recently the Federal Housing Finance Agency (FHFA) issued guidance on the new maximum loan limits that will apply to conventional home loans in 2020.
This limit or cap is typically applied to both the baseline loan amounts and to the high-cost area loan amounts.
As I’ve written in the past, the Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price.
Since house prices increased year over year, based on FHFA’s house price index report, the loan limit is adjusted accordingly.
For example, in Napa County, the current baseline loan limit is $484,350, which will be moved up to $510,400.
Therefore, per HERA’s calculations, the maximum or ceiling amount for one-unit properties is 150 percent of this baseline loan limit.
You have free articles remaining.
However, the loan limit maximum for Napa County didn’t quite reach the allowable ceiling amount of $765,600 and it was capped at $764,750 instead.
This is super close to the maximum allowed and still much improved from last year’s $726,525 mark. Either way, it’s important for you to know the differences when reviewing your loan options with your lender.
While median home values have generally risen in many high-cost areas over the last 12 months, the current loan limits weren’t supportive enough and forced lots of borrowers into larger down-payments or towards jumbo loan programs.
Now that the loan limits are bigger, it allows you to fall back into the more flexible underwriting guidelines of Fannie and Freddie along with taking advantage of their competitive interest rates. With these new loan limits today, you will immediately have extra borrowing power assuming your application is approved.
In addition, there are two visual or psychological hurdles we have crossed over with these adjusted loan limits.
The first is the $500,000 threshold for the baseline amount and the second is the $800,000 threshold for purchase price.
Assuming a 5 percent down payment, you can look up to a $805,000 purchase price in Napa County with this new maximum loan limit without having to go into a jumbo loan program, specialty product or some sort of combination loan option.
If you’re trying to refinance, this can offer plenty of help as well, yet consult with your lender on the timing for it. Hopefully these loan limit adjustments for 2020 keep our housing industry strong and afford further opportunities to those who want to own a home.