This week the Federal Housing Finance Agency announced the upcoming conforming loan limits would increase to 806,500, a $40,000 increase from the 2024 loan limit of $766,550. This increase is about the same dollar amount as last year’s increase when they rose from the 2023 limit of $726,200. Conforming loans are loans eligible to be underwritten by Fannie Mae and Freddie Mac, making them lower risk and with government-backed protections. Anything over the conforming loan limit is considered a jumbo loan, which typically comes with more stringent requirements for credit scores and debt-to-income ratios.
For higher cost of living areas, which are required to be 150% of the regular loan limit, the threshold rises to $1,209,750, an increase of about $60,000 over the 2024 limit of $1,149,825. Industry analyst Jonathan Miller points out the increasing divergence between the loan limit and the median sales price that has been taking place for years, but was especially pronounced after the pandemic (conforming loan limits are calculated based on average sales price).
This announcement comes along with the news that average mortgage interest rates ticked down slightly over the past week, to 6.81% compared to the week before of 6.84% for a 30-year fixed rate loan, according to Freddie Mac’s weekly report. One year ago rates hovered around 7.22%.
The average loan amount for new conforming loans has been on an upward trend over the past month, rising to $439,200 last week, according to the Mortgage Bankers Association. With next year’s threshold now within 80% of a seven figure purchase price, million dollar homes are going to be within reach for more people.
Read the full article here