Every year about this time Fannie Mae and Freddie Mac come out with updates to the conforming loan limit. This year the limits jumped over $500,000! There were also changes for FHA and VA loans.
The new limit for Fannie and Freddie is $510,400 for single family homes. If you are in a high cost area, the limit is $765,600. The high cost areas are not in Minnesota. A 2 unit home has a new limit of $653,550, a 3 unit is $789,950 and a 4 unit is $981,700.
For many, a conforming loan is easier to get approved for, interest rates may be lower and the loans are more available than jumbo or non-conforming loans. Conventional loans may allow for appraisal waivers – especially on refinances and that can save borrowers money. You may not need as much documentation with a conforming loan amount so it can help you get financing easier.
FHA limits also increased. For the Minneapolis St Paul metro area, the new limit will be $382,950 for a 1 unit home. Outside the metro area, the limit is $331,760. If you are looking at a 2 unit in the metro area, the new limit is $490,250.
VA changed their policy on financing and now will allow 100% financing for veteran’s with full entitlement. The Freddie Mac loan limit will no longer apply. Some investors are capping the max loan, for example one investor has a cap of $1,000,000 for 100% financing. In the past, if the loan was over the Freddie Mac loan limit, there was a maximum amount you could borrow- that has changed.
VA also changed their VA funding fee rates. Effective January 1, 2020, the VA funding fee rate for first time use is now 2.3% with 100% financing. If you have used your VA loan previously, the new fee is now 3.6%. Cash out refinances are 3.6% for subsequent use. An interest rate reduction loan is still at .50% for the funding fee. The funding fee can be added to your mortgage.
Hopefully the new limits will help homebuyers looking at higher priced homes! Interest rates are fantastic and hopefully will not increase too much next year. This can help you purchase that new home you are looking at!!
Leslie Vanderwerf, NMLS ID#335509, AMEC Home Loans, An Equal Housing Lender, NMLS#150953 – Email – Website
