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Are you Maximizing Increased Loan Limits?


No one wants to remember COVID-19; however, it is undeniable that the pandemic did fuel the biggest dollar increase in the conforming loan limit for Fannie Mae and Freddie Mac since the 1970’s. The question is are you providing knowledge of this to your clients?


What is a Conforming Loan Limit?


A conforming loan limit is the maximum dollar amount of a mortgage that the government will purchase or guarantee. When an increase occurs, it means more homebuyers will be able to apply for conforming mortgages instead of “jumbo loans”, which are typically harder to qualify for and carry higher interest rates because they’re not backed by the government.¹


The official date of this increase: January 1, 2022. The baseline conforming loan limit is tried to national average home prices. “After the 2007-2009 housing crash and rescission, it didn’t go up for a decade, remaining static at $417,000 until home prices clawed their way back to previous heights,” mortgage editor Matt Carter informs.²


In November, the FHFA releases the conforming loan limit for the year ahead when it publishes the Housing Price Index for the third quarter. Before 2022’s official data conforming loan limit was known, lenders considered themselves on safe ground up to $625,000.³


“With the recent run-up in home price appreciation affecting many markets throughout the country, we wanted to step in and provide support for borrowers,” PennyMac executive Kimberly Nichols said in a statement. “This will specifically help those trying to purchase a home or access equity in their property while rates are relatively low.”


In 2021, PennyMac is offering the following expanded conforming loan limits through the company’s broker and correspondent channels that warned that Fannie and Freddie’s automated underwriting systems would return an ineligible result when submitting loans that exceeded the official 2021 loan limits, meaning full appraisals were required for the loan limits.⁵

· One-unit properties: $625,000

· Two-unit properties: $800,250

· Three-unit properties: $967,250

· Four-unit properties: $1,202,000⁶


This is good news for homebuyers who want lower interest rates and should be utilized by sellers for reasonable pricing efforts.

 

¹ Carter, Matt. (2021, September 30). Fannie, Freddie Loan Limits set for record 50-year leap in 2022. Inman. Retrieved October 5, 2021, from Source.

² Ibid.

³ Ibid.

⁴ Ibid.

⁵ Ibid.

⁶ Ibid.


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