Fannie Mae announced that they will increase the conforming loan limits for 2020. But what does this mean for homebuyers and homeowners?
First, a little baseline…
Every single county in the United States has a maximum loan amount that Fannie Mae (FNMA) and Freddie Mac will guarantee. These numbers change each year, as the markets and economy changes.
Why does this apply to homeowners? Well, if you were to take out a first mortgage, and you are under the maximum loan amount, then your loan would be subject to Fannie Mae/Freddie Mac guidelines. If the mortgage loan amount is over the maximum loan limit for your county (meaning the county that the property is located in) then you would need to apply for a jumbo loan (or non-conforming mortgage).
Jumbo loans typically have more requirements than conforming loans (read between the lines- more hoops for borrowers to jump through).
Conforming loans are seen as more favorable, so they historically have a faster process, more favorable interest rates and costs, and fewer requirements of borrowers than a jumbo loan does.
So are these my only 2 options? No, absolutely not. These are just the basic ground-rules that lenders have to follow. Now, another option would be to use secondary financing to help lower the loan amount below the conforming limit. In layman’s terms- your first mortgage is set below the loan limit and a 2nd mortgage (a 2nd loan against the property) would finance the gap. This can help homeowners avoid jumbo loans, (you can also avoid PMI this way), and get a better offer on their first mortgage. But, more on this option later…
Back to the topic at hand… Loan Limits! So what are these loan amounts? I’m glad you asked… well, drumroll please…Here is a snapshot of the loan amounts for 2020!
Maximum Loan Amount for 2020
Contiguous States, District of Columbia, and Puerto Rico
1 Unit – $510,400
2 Units – $653,550
3 Units – $789,950
4 Units – $981,700
Alaska, Guam, Hawaii, and the U.S. Virgin Islands
1 Unit – $765,600
2 Units – $980,325
3 Units – $1,184,925
4 Units – $1,472,550
https://www.fanniemae.com/content/announcement/ll1909.pdf
https://www.fanniemae.com/singlefamily/loan-limits
At Blue Arrow Lending, we want to educate our clients so that they are empowered and confident in making decisions on their home loans. Visit our mortgage library, or contact us today to get started!
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