Photo: Robert Clark
The limit for conforming mortgages in the US is set to increase for only the second time in a decade in 2018.
As a result, homebuyers in NYC and other pricey housing markets could save thousands, according to a report released earlier this week by the listing site Zillow.
Nationally, the Federal Housing Finance Agency (FHFA) will increase the limit for conforming mortgages by 6.8 percent, or $29,000, to $453,100 in most counties in 2018. A conforming mortgage is one that meets government-sponsored enterprise (GSE) guidelines. That is, they have the Freddie Mac or Fannie Mae guaranteed seal of approval.
Therefore, any loans above the new $453,100 limit will require additional financing from private lenders, generally a higher cost than GSE backed loans. These types of loans are referred to as “jumbo loans.”
By raising the conforming loan limit, homebuyers in pricy markets could potentially avoid the need for a “jumbo loan” and save thousands.
The 2018 rate of increase in the loan limit is on par with average national home price growth, which was 6.5 percent in October, says Zillow.
Some 25 million homes nationwide are valued high enough to require a “jumbo loan” for purchase. However, under the FHFA changes, nearly 2.8 million homes will again be under the conforming loan limit.
The New York City metro area saw the largest number of homes fall back under the conforming loan limit at 206,000, followed by the Los Angeles metro area (148,700), Chicago (102,800), and Seattle (91,300).
However, the FHFA identified 138 counties as “high-cost counties” and raised the conforming loan limit above the national baseline.
Three Washington state counties had the loan limit increased by $74,750 to $667,000 — the largest increases seen in the “high-cost counties.”
A dozen counties in New York were among the 138 “high-cost counties” and saw loan limits increased to $679,650.
Meantime, Hood River County in Oregon, located just east of Portland, was identified as a “high-cost county” for the first time.
Regardless of where they reside, the loan limit changes will likely not heavily impact many first-time buyers.
"This change likely won’t have a significant effect on first-time buyers, because – except for the most affluent first-time home buyers – few will be looking to take out a loan for higher than the conforming limit," Zillow Senior Economist,
The typical US home is currently valued at $203,000, and the conforming loan limit was raised to more than double that.
"It’s more likely that this change will affect buyers who are moving up rather than first-time buyers," Terrazas tells BuzzBuzzNews.
Click here to read the entire report.