New Loan Limits Mean You Can Afford More House
Wouldn’t it be great if you could afford a bigger house without making any more money? Welcome to 2019! New loan limits for conforming and jumbo loans will make it easier to buy a house this year.
For single family homes, there are two types of conventional loans: conforming and non-conforming (also called jumbo). Conforming loans are mortgage loans that conform to the limits defined by government-backed entities Fannie Mae and Freddie Mac. In 2018, conforming loans were not allowed to go above about $453,100 for single family homes in Mendocino County. Jumbo loans are those that are too big to conform to government limits. Generally speaking, jumbo loans are more expensive; that is to say, their interest rates run about a quarter to a half percent higher.
Before I go further, I must thank Ginny Richards of Stearns Lending. Ginny is always well-informed and generous with her time. If you find this column helpful, the credit goes to her.
HOW MUCH MORE HOUSE CAN YOU AFFORD?
In 2019, the new conforming loan limit is $484,350. To put this in context, let’s say you need a loan of $480,000 to buy your dream home. You can use a conventional loan because you have saved the 20 percent down payment, you have good credit (a FICO score of 680 or higher), and proof of a steady source of income. Usually, people opt for a 15-year or 30-year fixed interest rate. Before 2019, a loan of that size required a jumbo loan, but now it can be a conforming loan, which reduces your interest rate by half a percent. That saves you about $150/month. When it comes to qualifying, all other things being equal, the new loan limits allow you to qualify for a house that’s $25,000 more expensive than the one you qualified for last year.
WHAT IF THE DOWN PAYMENT IS TOO MUCH?
Conventional loans aren’t the only loans out there. FHA loans also have new limits, and they do not require a big down payment. There is no jumbo version of an FHA loan, but if you qualify for an FHA loan at the new loan limits, you only have to put 3½ percent down for owner-occupied properties.
DOES THIS APPLY TO INVESTMENT PROPERTIES?
In addition to single-family homes, FHA loans have new limits for duplexes, triplexes and 4-plexes. The new limits are as follows:
2018 2019
Single-family homes $453,100 $484,350
Duplexes $524,100 $620,200
Triplex $633,500 $749,650
4-plex $787,300 $931,600
Long story short, if you were close to affording your dream house last year, it’s worth taking another look. With new loan limits, the home you’ve always wanted may now be within reach.
If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. If you send me an idea I use in a column, I’ll send you a $5 gift card to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 40 years.
