Net Worth: Limit raised for government home loans
Homeowners will be able to borrow up to $ 822,375 with a mortgage backed by Fannie Mae or Freddie Mac in most Bay Area counties next year, their regulator announced Tuesday.
That will be the maximum conformingloan limit for one unit properties, and it’s up 7.4% from $ 765,600 this year. It is adjusted each year, based on the change in U. S. home prices between the third quarter of the current and previous years, as computed by the Federal Housing Finance Agency. ( Technically, it’s the regulator’s seasonally adjusted, expanded data home price index, which is broader than the agency’s flagship Home Price Index, which advanced 7.8%.)
The Fannie Freddie loan limit in most U. S.
counties will be $ 548,250 next year. The law allows a higher limit in areas with highpriced homes, but it can’t exceed $ 822,375, which is 50% higher than the base limit. That will be the limit in all Bay Area counties except three in 2021. It will be $ 816,500 in Napa County, $ 550,850 in Solano County and $ 707,250 in Sonoma County.
The limits apply to both purchase and refinance loans. It’s higher for homes with two to four units.
“This is really good for the Bay Area housing market. It will continue to support these higher prices we are seeing,” said Dick Lepre, a senior loan adviser with RPM Mortgage.
Someone who borrowed $ 822,375 could buy a home worth about $ 1,028,000, assuming a 20% down payment. The median price paid for an existing, singlefamily home in the Bay Area was $ 1.1 million in October, according to the California Association of Realtors. The median condo price was $ 740,000.
Conforming loans, those backed by Fannie and Freddie, are usually cheaper than larger mortgages, called jumbos, because they are guaranteed by the U. S. government. Jumbo loans are not.
“Rates vary but figure about 0.5 ( percentage points) higher on jumbo,” Lepre said. Jumbo loans are also “more restrictive in terms of credit scores, loan to value ratios, debt ratios and cash reserves.”
Before the coronavirus pandemic hit, jumbo rates were closer to conformingloan rates. But they diverged again as lenders became concerned about borrowers defaulting and general economic uncertainty, Lepre said.
The housing finance agency released a separate report Tuesday showing homeprice appreciation rates for the largest 100 metro areas between the third quarter 2019 ad 2020, using its narrower Home Price Index.
By this measure, home prices rose 8.5% in OaklandBerkeley Live rmore ( ranking 40th out of 100 metro areas), 8.1% in Santa Jose Santa Clara Sunnyvale ( ranking 49th) and 6.5% in San FranciscoSan Mateo Redwood City ( 79th place).
Rates on mortgages backed by the Federal Housing Administration will be announced Dec. 2.
To see the Fannie Freddie loan limits for all counties next year, go to bit.ly/bayareaconforming 2020.