Last year, the Federal Housing Administration (FHA) announced it would be increasing the limits they set on their home loan products. In other words, if you got approved for an FHA loan in 2019, you probably got to take advantage of more borrowing power. Fast forward to the present and the FHA has announced yet another increase for 2020, giving potential home buyers even more borrowing power in the new year.
Higher FHA Loan Limits in 2020
The U.S. Department of Housing and Urban Development (HUD) announced in December that the 2020 FHA loan limits would increase for most U.S. counties. The 2020 “floor” loan limit for single-family housing in most of the nation will rise to $331,760, nearly $17,000 more than the 2019 limit of $314,827. Counties that are considered “high cost” areas will see even higher loan limits. This “ceiling” loan limit will rise to $765,600, almost $40,000 higher than the $726,525 limit of 2019. The changes will go into effect on January 1, 2020.
Conforming Loan Limits Increasing, Too
FHA loan limits aren’t the only ones getting a lift; conforming loan limits for Fannie Mae and Freddie Mac are increasing in 2020 as well. The new limit for these loans will be $510,400, putting the FHA’s floor limits 65% lower than their conforming-loan counterparts. The 2019 limit was $484,350 for single-family homes.
How Higher Loan Limits Affect Consumers
Put simply, higher loan limits means more borrowing power at better rates.
Higher lending limits allow borrowers the opportunity to take advantage of conventional and FHA interest rates versus higher jumbo or non-conforming rates. For example, if you have your eye on a home priced at $495,000, you would be able to qualify for a conforming loan under the new loan limits in 2020. However, if you tried to buy the same home in 2019, the price tag would put you over the loan limit and you would need to seek out non-conforming financing options, which tend to come with higher interest rates.
The other benefit of rising loan limits has to do with providing more opportunity for selection for buyers. In areas with tight inventory, higher prices are common. Thus, a lot of otherwise creditworthy buyers struggle to make a purchase, since they would have a harder time qualifying for affordable loan options. This can often force the buyers to narrow their home search to properties in a lower price range, which can limit their selection and may require having to sacrifice options that they most desire in a home.
With higher loan limits, buyers who are up against low-inventory markets can at least have the chance to qualify for loans that are more in line with prices in their area.
Exploring FHA and Conforming Loans
At Luxury Mortgage, we offer a wide selection of home loan products to suit a variety of borrowers. We proudly offer FHA loans as well as conforming loans and can assist buyers with finding the loan program that works best for their needs and budget. We also offer jumbo financing, Simple Access home loan solutions and more. We invite you to explore our selection today.
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