How FHFA Loan Limits Increase Buying Power
We’re sure you saw the news last week about the Federal Housing Finance Agency (FHFA) increasing 2021 maximum conforming loan limits, but here are a few key points in case you missed it:
- The new conforming loan limit was increased from $510,400 to $548,250 based on a 7.42 percent housing price increase between the third quarters of 2019 and 2020
- A small number of counties in high-cost areas will require a higher loan limit (see the map here)
- The increased loan limit will also increase buying power for borrowers in 2021
How Buyers Benefit from Increased Loan Limits
Borrowers who meet the criteria for conforming loans often have excellent credit and a low Debt to Income Ratio, and because of this, are traditionally offered more competitive rates. However, as home prices fluctuate throughout the year, some buyers may find that they need to borrow more than the conforming loan limit to compete with offers in their market. Opting for a loan solution with a higher borrowing limit doesn’t always come with the same competitive rates offered with a conforming loan.
That’s why an increased conforming loan limit is great news for borrowers who don’t need a jumbo loan but are near or over the current maximum borrowing limit. Simply put, higher loan limits allow homebuyers to borrow up to an amount that reflects the housing market around them. Read more about increased buying power on the PacRes blog.
Do you have clients who may benefit from a higher loan limit? I would be happy to sit down with them and discuss their increased buying power in 2021. Feel free to Venessa Eck at any time!