If you are looking to buy a home with a mortgage backed by Fannie Mae or Freddie Mac, you should know that the loan limits for these agencies will change in 2024.
Here's what you need to know about the new conforming loan limits (CLLs) and how they affect your home buying options.
Conforming loan limits are the maximum amount of money that Fannie Mae and Freddie Mac can purchase or guarantee in a mortgage. These limits are set by the Federal Housing Finance Agency (FHFA) based on the average home price in the U.S. and vary by location and property type.
Conforming loan limits matter because they affect your borrowing power and interest rate. Generally, mortgages that fall within the CLLs are considered "conforming loans" and have lower interest rates and more flexible terms than "non-conforming loans" that exceed the CLLs. Non-conforming loans are also known as "jumbo loans" and may have higher interest rates, stricter underwriting standards, and larger down payment requirements.
The FHFA announced that the baseline CLL for one-unit properties in most of the U.S. will increase from $726,200 in 2023 to $766,550 in 2024, a 5.56% increase that reflects the rise in home prices over the last year. This means that you can borrow up to $766,550 with a conforming loan in most areas of the country.
However, some areas have higher median home values than the national average and are considered "high-cost areas". In these areas, the CLLs are higher than the baseline limit and can go up to $1,149,825, which is 150% of the baseline limit. This is the maximum amount that Fannie Mae and Freddie Mac can purchase or guarantee in a mortgage for one-unit properties in high-cost areas.
The FHFA provides a list of the 2024 CLLs by county on its website. You can also use this tool to look up the CLL for your area.
Some special areas, such as Alaska, Hawaii, Guam, and the U.S. Virgin Islands, have even higher CLLs due to statutory provisions. In these areas, the CLL for one-unit properties will be $1,149,825 in 2024.
The new CLLs will apply to mortgages originated on or after January 1, 2024.
The new CLLs can help you buy a more expensive home or refinance your existing mortgage with a lower interest rate and better terms. If you were previously priced out of the conforming loan market or had to pay a higher rate for a jumbo loan, you may now qualify for a conforming loan with the new limits. This can save you thousands of dollars over the life of your loan and make your monthly payments more affordable.
However, keep in mind that conforming loans still have other eligibility criteria, such as credit score, income, debt-to-income ratio, and loan-to-value ratio. You will also need to pay for private mortgage insurance (PMI) if your down payment is less than 20% of the home value.
If you are interested in applying for a conforming loan or refinancing your current mortgage, you should shop around and compare offers from different lenders. You can also consult with a mortgage professional who can help you find the best option for your situation.
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