The Federal Housing Finance Agency (FHFA) has released the loan limits for 2023. With this announcement, FHFA has effectively raised the limit on how many dollars can be borrowed using Fannie Mae & Freddie Mac Conventional loan products. The loan limits increased across the nation, with variances in the increases for “high cost areas”, and also for multi-unit properties. That is, the loan limits are higher for high cost areas, and also higher for multi-unit properties.
Here is the chart showing the loan limit updates for the year 2023:
What does this mean for borrowers?
Borrowers can benefit from the increases in loan limits mostly due to the fact that conventional lending guidelines are more forgiving than jumbo loan guidelines. Any loan above the conventional loan limit falls into jumbo loan territory, and may be more difficult to qualify for. For example, many jumbo loan products require at least 10% down payment and good to great credit scores. Conventional loans require 3-5% down payment, and are far more forgiving in terms of FICO score.
These increases also mean that more cash is available to home owners who want to use conventional cash out refinance mortgages, and investors who want to purchase more expensive investment properties using conventional guidelines.
With home prices rising drastically year over year since 2020, these loan limits should help more borrowers access competitive financing terms , and help those in higher priced markets buy a home without an immense down payment.
1st Time Over $1 Million
2023 marks the first year FHFA will allow Fannie Mae & Freddie Mac backed conventional mortgage loans exceeding $1 million dollars in high cost markets for single family homes. This will help buyers obtain loans to help buy homes in expensive metro areas or areas where median home values have exceeded the million dollar mark, without the need for an intimidating down payment. To fully understand the benefit, take a competitive jumbo loan product and compare the down payment requirement on a $1.1M home. With a competitive jumbo product requiring a 20% down payment, that’s a $220,000 investment (before closing costs!) to get into a home. With a conventional loan product requiring just 5% down, the initial investment shrinks to $55,000, helping to make it easier to achieve the dream of home ownership in higher cost communities.
For more information, or to see what the loan limits are in your community, reach out to your MasonMac loan officer today!