As expected*, The Federal Housing Financial Agency (FHFA) announced today that they are raising the conforming loan limit for 2017 from $417,000 to $424,100. This is the first raise in the conforming loan limit since 2006. This is important because conforming loans – those purchased by Freddie Mac or Fannie Mae – are explicitly guaranteed by the government, so investors are willing to take a lower yield on loan pools made up of them. This translates to lower interest rates than on other loans.
In our area, this may not seem like a big deal. After all, many families have mortgage balances a great deal higher than this. Well, FHFA also has a category called “high-balance conforming loans” for high-cost areas.
Does the San Francisco Bay Area qualify as a “high-cost” area? Oh, yeah.
The limit for high-balance conforming loans has been raised from $625,500 to $636,150. High-balance conforming loans carry a slightly higher interest rate than conforming loans.
Above that level, you are looking at “non-conforming” loans, also known as jumbo. These loans carry an interest rate that is a little higher still.
These limits go into effect on January 1, but in the past most lenders began to offer the new limits immediately, since loans locked today would probably not be sold to Fannie or Freddie until well after that date. The lenders will have to let us know, however, since we haven’t had an increase in 10 years – who knows what standard practice will emerge?
* See my post from October 5th