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California Real Estate Industry Professionals Support Higher Conforming Loan Limits

Written by Posted On Monday, 02 December 2019 12:23
Newport Beach Homes on the Boardwalk Newport Beach Homes on the Boardwalk Flickr c/o Ken Lund

The Federal Housing Finance Agency's (FHFA) announcement to increase the 2020 conforming loan limits was met with wide praise by Caifornia real estate industry organizations which includes CAR and CMLA. Conforming mortgages are backed by Fannie Mae and Freddie Mac to $510,400 on single-family properties and a $765,600 ceiling in designated high-cost areas. In 2019, the loan limits were $484,350 and $726,525, respectively.

"Mortgage, real estate, and homebuilding companies throughout the country support the FHFA's decision for raising Fannie Mae and Freddie Mac conforming loan limits effective Jan. 1, 2020. The new loan limits recognize California's and the country's ever-increasing home values and will see to it that more home buyers can benefit from affordable mortgage programs," said CAR President Jeanne Radsick.

"These increases keep borrowing expenses reasonable for many California home buyers and will support housing affordability throughout the state. We hope the FHFA will keep searching for methods to stimulate homeownership possibilities throughout all housing markets, including high-cost markets like Los Angeles, Orange County, and the Bay area."

The conforming loan limit establishes the highest amount of a mortgage that Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), can buy or "guarantee." Loans above these limits are known as "jumbo loans" or non-conforming loans.  Borrowers try to avoid jumbo loans if they can because they typically have stricter underwriting guidelines and sometimes have higher mortgage interest rates than conforming loans, higher monthly payments and hinder the borrowing capacity of Californians to buy homes by making them not as affordable.

Prospective home buyers and existing homeowners have an important decision to make, so it is important for them to understand that conformng loan limits may be a better option than a jumbo loan. A great example is the 90 LTV jumbo loan some home buyers choose versus a conforming high balance loan with a piggyback second loan.

Keep in mind it's not only California that will see higher mortgage loan limits in 2020. Actually, most counties across the country will be altered higher next year, in reaction to increasing home values. Contact an NMLS licensed mortgage loan originator today and experience something great that borrowers are talking about!

 




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