Having a new administration in Washington means federal housing policies may change. Unfortunately, the FHA Premium Reduction was cancelled. But the Federal Housing Finance Agency (FHFA) is still moving forward with an increase in the Conforming Loan Limit.
What’s a Conforming Loan?
A conforming loan is a loan that meets certain standards set by the FHFA. Since the government agencies called Fannie Mae and Freddie Mac stand behind millions of mortgage loans, the government makes stipulations about how much money people can borrow at certain rates. Since 2006, loans under $417,000 were considered to be Conforming Loans. There are a few other things in a buyer’s finances that could keep a loan from being considered a Conforming Loan. But the size of the loan is the most well known factor. When a mortgage is considered a Conforming Loan, buyers typically have access to lower interest rates.
If loans go over the Conforming Loan Limit, it is considered a “Jumbo Loan.” And since bigger loans carry more risk, they also come with higher interest rates.
Changes in the Conforming Loan Limit
Since the housing market steadily continues to recover, prices continue to rise. Because they rise, mortgage sizes rise too. Every year, the government evaluates how well people are paying their mortgage. This year, the government has decided that people are paying their mortgages well enough to feel comfortable allowing people to borrow more money at lower interest rates.
The Conforming Loan Limit has been increased by 1.7% to $424,100. From now on, loans of $424,100 will be considered Conforming Loans. That means some loans that used to be considered Jumbo Loans will now be Conforming Loans. Therefore they will come with Conforming Loan rates.
What You Should Do
Give us a call at McLellan Financial Mortgage. We will check if this change in federal policy will help you save money on your mortgage. Just a small rate reduction could help you save thousands of dollars in interest over the life of your loan.