Higher loan limit will boost sales
Aboost next year in the maximum conforming loan limit for mortgages acquired by Fannie Mae and Freddie Mac reflects rising home prices nationally, and locally could help stimulate sales in a stubbornly sluggish price range.
Next year, the maximum conforming loan limit for single-family properties here and in most of the country will be $453,100, an increase from $424,100 in 2017, according to the Federal Housing Finance Agency.
FHFA raised the limited because its main housing price index showed that prices increased 6.8 percent, on average, between the third quarters of 2016 and 2017.
The increased limit means that next year, Fannie and Freddie will be able to buy higher mortgages from lenders. Buying the loans sends liquidity back to the lenders so they can make more loans.
Fannie and Freddie buy mortgages to package together and sell to investors. Raising the limit on the mortgages Fannie and Freddie can buy effectively raises the limit on loans that lenders are willing to make without going “jumbo.”
So-called jumbo loans, by definition, are bigger than what the government-sponsored enterprises, Fannie and Freddie, can buy. Lenders making jumbo loans, since they are more exposed, require higher down payments, and generally charge higher fees and interest rates.
Which some borrowers can’t pay.
Raising the limit will open a window for lending — and buying and selling — in a price range greatly affected by the crude oil price swoon.
“It actually is very helpful for our market,” said Scott Senner, loan officer with Interlinc Mortgage LLC in Edmond. “There are quite a few homes on the
market priced between $450,000 and $500,000 that have been in a sort of ‘lending purgatory’ where a borrower would have needed to get a jumbo loan instead of just a normal conventional loan. This increase in the conforming limit will make those homes much easier to sell.”
The maximum conforming loan limit was $417,000 for the duration of the Great Recession, from 2006 until January of this year, when it went to $424,100 based on rising home prices.
Next year’s increase will both reflect further improvement and stimulate it, Senner said.
“It will be the biggest help to buyers who are purchasing homes in the $475,000-$500,000 range, because now they will not have to put 20 percent down to buy the home,” he said. “Some might look at that and think ‘Well, that is not that big of a deal,’ but in reality it really is.”
In fact, Senner said, it will ease up buying and selling wider than the upscale realm.
“The folks buying in that (upper) price range currently live in homes valued between $150,000 and $250,000, which means when they move up, those homes come on the market, and there is a real shortage of homes for sale in that price range,” he said.