Loan limits arrive just in time for 5% down purchase

Loan officer: John Holmgren, Holmgren & Associates/Finance of America Mortgage.

Property type: Single family home in Oakland

Purchase price: $857,000

Loan type: 30year fixed rate loan.

Loan amount: $814,150.

Rate: 2.875% with no points.

Backstory: This first time home buyer had been looking for an affordable home for several years, hoping to buy in San Francisco since she is a software engineer working in San Francisco, recognizing that at her price range her housing options would be limited to condominiums. The two main obstacles were the high prices in San Francisco combined with her limited down payment. Financing options are very limited for those having less than 20% to put down when the borrowed amount exceeds the Fannie Mae maximum loan amount, which was $765,600 for most Bay Area counties in 2020.

This buyer’s agent, Betty Rajabi of Sotheby’s International Realty in Berkeley, had urged her to consider the East Bay because of improved affordability. In late November, just as the buyer was becoming receptive to this option because of the desire for more space in this workfromhome environment, Rajabi found a home that was perfect for the buyers needs, but still a bit out of reach from a financing standpoint because a 5% down payment would produce a loan amount above the $765,600 Fannie Mae limit.

Rajabi contacted me to review financing options for her buyer and I was happy to inform her that the Fannie Mae loan limit had just increased to $822,375 so that the buyer could proceed with a home offer with her 5% down payment. Our company started making loans at the new limit as soon as it was announced.

While rates for Fannie Mae loans are now comparable to rates for “jumbo” loans, Fannie Mae loans have the advantages of allowing a down payment of as low as 5% (sometimes less) and much lower cash reserve requirements, in addition to allowing higher debt ratios and lower credit scores. In this case the key feature was the ability to put 5% down, enabling this buyer to become a homeowner.