Estimated duration: 3-4 minutes
Much has been said and written about the state of the US housing market. As home prices continue to rise across the country, potential buyers are being affected in many ways. Mortgages that buyers need to complete home purchases also require some adjustments.
For example, some buyers who expected a conventional or conformed loan found they needed to take out a jumbo loan when home prices exceeded the conformed loan limit.
But what is the difference between a conforming loan and a jumbo loan?
Each year, the Federal Housing Finance Agency (FHFA) examines median US home prices to set matching loan limits. This is the maximum amount available to the buyer as a qualifying loan. Anything over that amount will be a jumbo loan.
The FHFA won’t publish the new limit until November, but all indications are that the 2023 limit will be around $715,000. This is 10% above the 2022 cap of $647,200.
alta bank Mortgage officer Heidi Nelson Ogilvy said the new limits are good news for homebuyers, but there are caveats.
“Higher loan limits make it easier to buy more expensive homes, but buyers need to have access to their assets to qualify for the larger loan,” she explains. This will give borrowers access to the larger lines of credit they need to purchase homes in today’s super hot housing market.”
The actual down payment is based on many factors, but most home buyers can plan for between 10% and 20% of the purchase price of their home. An increase in the loan limit could allow customers to buy a higher selling price, but could also mean a higher down payment required to bring the loan amount up to this new limit of $715,000. .
By offering a higher limit, a qualifying loan may reflect a lower interest rate, about 0.25% to 0.50% discount on the interest rate, than having the borrower have a jumbo loan.
A qualified loan meets the guidelines of Fannie Mae and Freddie Mac. “Conforming loans are not guaranteed and/or guaranteed by the federal government. If not, Fanny/Freddy won’t buy them if they follow Fanny/Freddy’s guidelines,” says Nelson-Ogilvy.
Qualified loan underwriters, such as Altabank, fund the loans, which are typically sold to investors such as Fannie Mae and Freddie Mac. Eligibility guidelines are strict, but often include the advantage of slightly lower interest rates, as well as less documentation required for jumbo loans.
Nelson-Ogilvy’s advice to homebuyers is to work with a mortgage officer who has extensive experience underwriting both qualified and non-conforming loans (jumbo loans above the new $715,000 loan limit).
There are many options for loans for homebuyers. While you may be eligible for a larger matching loan, it’s important to note that it may not be optimal for your particular situation.Experienced homeowners like Altabank’s Nelson-Ogilvy and colleagues Let your loan officer evaluate all your options and choose the program that best fits your needs.
Visit your nearest branch or check out your mortgage options online. Altabank.com.
Altabank is an FDIC member and equal home lender.