How the new limit plays out for buyers
That’s only a 1.7% increase, but given our rapidly appreciating market, every little bit helps. With this adjustment, maximum price a buyer can spend with the minimum (3%) down payment changes from $429,900 up to $437,250. And buyers aiming to avoid MI and put 20% down, will seen their maximum price stretched from $521,250 up to $530,125.
These new limits apply to loans sold to Fannie and Freddie starting January 1, 2017, so lenders should be able to offer the new limits pretty much immediately.
It’s about darned time
And do you know how long it’s been since Fannie Mae last increased loan limits? January 1, 2006. Yup, we’ve been pinned at the same maximum loan amount for 11 years.
For you history buffs
Up until 2008, the conforming loan limit for each year was based on the average change in house price from October to October in the Monthly Interest Rate Survey completed by the Federal Housing Finance Board (FHFA). During the mortgage crisis the FHFA and Office of Federal Housing Enterprise Oversight (OFHEO) were merged to form the Federal Housing Finance Agency (FHFA).
On September 7, 2008, Fannie Mae and Freddie Mac were both placed into conservatorship under FHFA control (and there they’ve remained). Had the FHFA followed the old formula, loan limits would have fallen during the mortgage crisis. The FHFA, however, elected to leave loan limits at $417,000, rather than reducing them and further undermining the already struggling housing market.
What about FHA?
Thus far FHA has not made any announcements about their loan limits for 2017. For the time being, the FHA limits are $368,000 for a single family residence, $471,100 for a duplex, $569,450 for a triplex and $707,700 for a four-plex. But watch this space for updates. As soon as FHA determines next year’s loan limits I’ll post them here.