The Federal Housing Finance Agency (FHFA) recently announced that it will raise loan limits for mortgages backed by Fannie Mae and Freddie Mac, giving many homebuyers greater purchasing power. Starting in 2021, the maximum conforming loan limit for single-unit properties will increase to $548,250 – a 7.4% increase from the current limit of $510,400.
The announcement is positive news for homebuyers, who will have the opportunity to borrow more money under conforming loan guidelines in addition to taking advantage of record low mortgage rates. Any loan amount above the conforming limit is considered a jumbo loan. Jumbo loans generally have more stringent requirements and tends to carry higher interest rates.
The exact conforming loan limit varies geographically, and while it will increase to $548,250 throughout most of the country including Illinois, Michigan, Indiana, and Wisconsin, it will be higher in more expensive markets such as areas in California and New York. Raised limits reflect rising home prices throughout the U.S. including Chicagoland, where prices are appreciating after remaining relatively flat over the last few years.
How does this affect you?
Connect with a lender to find out! But as a general rule, most experts say that your housing expenses should not exceed 28 percent of your gross monthly income, but a variety of factors – from your credit score to other debt – can open this ratio up to a pretty wide range. Remember that there are other costs involved in buying a home outside of the down payment, such as closing costs, moving, decorating, and remodeling expenses. You should also consult with your accountant or financial advisor to talk about how real estate affects your financial goals. While these new loan limits greatly help buyers, knowing the bottom line is essential. Some lenders I HIGHLY recommend:
If you are thinking of making a move in 2021 – Let me partner with you & guide you home.