The conforming loan limit is the largest loan that Fannie Mae and Freddie Mac will purchase from mortgage lenders, like banks, credit unions, and mortgage companies. Loans sold to Fannie or Freddie (The Agencies) are guaranteed by the U.S. Government, so they have better interest rates than non-conforming loans.
Related: What is a Conforming Loan?
Te agencies review housing prices each year in the U.S. and set a new limit for loans they will purchase based on the amount needed to purchase a median priced home. In 2019 the limit was $484,350; in 2020 the new conforming loan limit will be $510,400.
High-Balance Conforming Loans
In certain high-cost areas – Silicon Valley for example – that doesn’t get close to financing a median priced home. (Or even a starter home, for that matter.) Since 2009 the agencies have used a second category, called a high-balance conforming loan limit. That limit is set at 125% of a county’s median home price or 150% of the nationwide conforming loan limit, whichever is less.
It varies by county, therefore, but the highest limit (which applies to almost all of the San Francisco Bay Area counties) was increased from $726,525 in 2019 to $765,600 for 2020.
More Than Just a Low Interest Rate
Among other benefits, high-balance conforming loans allow prime financing with as little as 5% down. This means you can now purchase a home for as much as $805,900 with as little as 5% down in high-cost counties and at the lowest interest rates possible.
If you live outside the Bay Area, click here to find out what the new conforming loan limit is in your county.
If you would like to find out what your interest rate would be, please call or email.
This article represents the opinions of Casey Fleming, and not necessarily those of C2 Financial Corp. This analysis was prepared with the best information available at the time it was written. Neither Casey Fleming, nor C2 Financial Corp., have any magical insider information about bond markets, real estate markets or mortgage markets that would make economic projections any more reliable than any other source. No warranty is made that the outcome will reflect the projections in this article, and neither Casey Fleming nor C2 Financial Corp. are responsible for decisions that you make regarding your own choices about your real estate or mortgage or those of your clients.
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