For the first time since the housing crisis, Federal Housing Finance Agency (FHFA) has agreed to increase the maximum conforming loan limits for loans backed by Freddie Mac and Fannie Mae. This is the first time since 2006 that the conforming limits have increased. The new limit starting in January 2017 is $424,100. The old limit of $417,000 had not changed for 10 years – it couldn't until home prices recovered to pre-crisis levels.
This is important as FHFA officials have claimed that the US housing market has remained "stuck". Overall home prices have not risen past the levels of the 3rd quarter of 2007, the "official" pre-implosion level. However, the 3rd quarter of 2016 finally rose above those levels! The Home Price Index for the 3rd quarter of 2016 moved past the 3rd quarter of 2007, so loan limits could finally be raised.
VA also came out with increased loan limits to match Fannie and Freddie's limit of $424,100. With VA loans, you can go above the $424,100 but you can't finance 100% over that. Once you go over $424,100 you need to make sure you have a 25% VA loan guarantee, from either the VA entitlement or down payment (or equity for refinances).
FHA also increased their loan limits. In the Minneapolis St Paul metro area, the new limit will be $332,350 as of January 1, 2017. Non metro areas will be at $275,665. FHA increased their limits about $6000, so that will help many potential home owners.
The new limits may help those buying near the top of the conforming limits – if you stay under $424,100, it allows for easier underwriting – usually! It also may help with lower interest rates. The new FHA limits may help those that wanted to buy a larger home but for some reason could not use conventional financing.
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website
