Here is the chart showing the loan limit updates for the year 2023:

FHFA announced increases to conventional loan limits for 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!

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These changes represent an increase in area median home prices, and county changes are based on local rates of appreciation.  These changes should allow home buyers more flexibility and more favorable loan terms in areas where home prices have seen increases over the past year.  One major perk of using conventional financing is the ability to finance up to 95% of a home purchase, having only a 5% down payment requirement.  For some borrowers and situations, conventional loans require only a 3% down payment, making it possible to achieve the goal of home ownership without bringing in a larger down payment that many jumbo loan products require.

Another perk of conventional financing is competitive rates and mortgage insurance terms for those with excellent credit.  For those with good (but not exceptional) credit, conventional financing is another great option, since most jumbo financing options either require excellent credit (leaving those without excellent credit with minimal options), or coming with higher rates.

2022 loan limits are in effect for loans delivered to Fannie Mae & Freddie Mac in calendar year 2022, but loan applications can begin being processed under the new loan limits effective immediately.  Your MasonMac loan officer can further explain how the increase in loan limits may be able to assist you in getting better loan terms or qualifying for more home.

For an interactive map that shows loan limits for your specific county, you can click here .  If you have questions on how these loan limits can help you, or any other mortgage related questions, you can ask an expert here.

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Until now, VA Mortgage loans allowed qualifying veterans to borrow up to 100% of their home value – so there has been no down payment needed for a home purchase for most vets, and even when it came to tapping into home equity, veteran home owners have been allowed to access 100% of their home’s value in cash to refinance.  Now though, Ginnie Mae has decided to change that guideline (keep in mind, for refinances only!) to allow home owners to only access up to 90% of their home’s value through a cash out refinance.  Likewise, on FHA loans Ginnie has reduced the amount of cash out a consumer can pull from their home to 80% (previously 85%) of the home’s value.

The VA Mortgage loan program offers one of the best loan products for eligible Veterans

The tightening of loan to values for VA mortgage loans comes after many investors have recently changed the pricing structure on VA loans – in the past, VA loans have offered generous rebates to buyers in higher rate buckets – for example, a borrower could get a 4% at “par”, or the rate that neither costs the borrower any points, but also comes with no rebate/credit toward closing costs.  But a 4.25% may have offered a full point or more in a credit to a borrower.  Many lenders used this rebate to begin offering VA mortgage borrowers higher rates with the intention of refinancing them into a lower rate later, effectively getting 2 loans (and strapping borrowers with 2 sets of closing costs), or sometimes more.

Investors have changed their pricing structures to incentivize lower rates for borrowers to prevent churning – which is good news, but unfortunately also makes it tougher for borrowers who are short on funds that in the past could have relied on lender rebates to pay for closing costs.  A borrower’s best bet is to work with a lender they can trust.  A loan officer should advise clients on their best options and what makes the most sense for their unique situation, and should also be able to answer any questions borrowers have along the way.  Veterans especially need this guidance, because the VA mortgage loan program is one of the most beneficial loan products on the market – with no down payment requirements, no monthly mortgage insurance (PMI), and low rates, vets that can use their VA mortgage loan entitlement should always be given the option, and the proper guidance to get the best loan.

For now, borrowers have a short window of time to close on VA mortgage loans under current guidelines, but any loans that close and fund after 10/31/19 are subject to the new loan to value restrictions of using only 90% of their home value for cash out refinances (purchase loans will still be offered with 0% down payment required for qualifying veterans).

Have questions on VA loans, FHA loans, or anything else mortgage related?  Ask one of our experts and get a quick response to any and all questions here.

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Experian, one of the 3 major credit bureaus, has recently rolled out a marketing campaign to highlight their ‘Boost’ product – one which a customer can use to report accounts that traditionally do not get reported to the credit bureaus, to increase their credit scores.

Sounds great, right?

Well to see a higher score, it is great, but to get a loan or approval through a lender, it may cause problems for consumers who don’t understand how the program works or the impact it can have.

Experian boost links to a consumer’s financial institution to see bills being paid, and uses this data to “boost” credit scores based on timely monthly payments.  While on the surface this sounds great, the lack of transparency in what’s being reported can cause issues for lenders, and on the mortgage side of things, “boosted” scores can’t be used for qualifying or for the purpose of getting a better rate or any other benefit to a loan program.  And lenders won’t overlook “Boosted” credit.  There are obvious markers showing a report that’s been updated with boost:

Boosted tradelines will show lenders that the information is “self reported”

In fact, consumers can actually be inconvenienced when using Boost because to get their loan processed, a borrower must first actually remove the boosted accounts from their credit reports.  So in these cases, Experian Boost makes the loan process more inconvenient for a borrower, and offers no benefit at all.  In fact, even Experian acknowledges this, at least somewhat, on their site.  On the Boost landing page, they include the disclosure:

“Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.”

“Not all lenders” means any mortgage lender using conventional or government financing, as MasonMac already confirmed with HUD and FannieMae that Experian Boost credit scores will not be considered in financing offerings from them.

Another potential downside to consumers is that even with an Experian Boost score, most lenders use averaging or more often, the middle score of the 3 credit bureaus.  In the latter case, if a consumer has 3 scores – a 550, 575, and a 750 (higher than the other 2 assuming that’s the Experian Boost score), the middle score will still be 575, so the boosted score offers no benefit.

So what could Experian Boost be beneficial for?  Well, for anyone looking to establish credit with limited credit history, Boost could provide a ….. Boost!  Sorry, we couldn’t help ourselves.  Also, while we’re mortgage experts, we aren’t experts across every field that uses credit scores, so there may be potential benefits elsewhere to using the boost product.  That said, though, it’s important to weigh the positives and negatives, and be informed that if you’re looking for a mortgage loan, Experian Boost is going to cause you more headaches than it’s worth.

Have questions about Experian Boost, want helpful tips for boosting your credit profile prior to getting a loan, or anything else from the mortgage world?  Ask an expert here!

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