If you’re planning to make 2020 the year you become a homeowner, you should be aware of the new conforming loan limits set by the Federal Housing Finance Agency (FHFA). Home prices across the country have been steadily on the rise for several years, and the FHFA continues to respond with annual limit increases for conforming loans. Not sure what this means for you? Here, I share how this new ceiling may affect those on the hunt for a home.
The new limit for conforming loans
According to the latest data from the FHFA, home prices have risen an average of 5.38% between the third quarters of 2018 and 2019. As a result, the conforming loan limit has been increased to reflect this change. In 2020, the limit for conforming loans will rise to $510,400 in most areas. If you’re planning to purchase a property in an area with a high cost of living, the loan ceiling will likely be even higher than the baseline of $510,400. If you’d like to explore the conforming loan limits for all counties, please visit this site.
What to expect when buying in Colorado
Colorado is a highly desirable place to live, and many of our cities’ home prices are above average. If you’re planning to buy in cities such as Boulder or Denver, the conforming loan limit will reflect the average home price in these areas. Boulder County’s conforming loan limit is increasing to $644,000 in 2020, up from $626,750 in 2019. Similarly, Denver County’s ceiling is rising to $575,000 from 2019’s limit of $561,200.
When to seek a jumbo loan
If you’re planning to purchase a home that’s priced above the conforming loan limit in its county, you’ll need to seek a non-conforming loan (commonly referred to as a jumbo loan). Jumbo loans are often necessary for areas like Boulder and Denver, where many properties are priced well above the conforming loan threshold. For future homeowners who need a jumbo loan, be prepared for a more rigorous set of qualification criterion. Since non-conforming loans aren’t guaranteed by Fannie Mae or Freddie Mac, lenders need to see a credit score above 700, plenty of cash reserves, and ample documentation.
2020 is sure to be an exciting year, and especially for those who are on the path to homeownership. With the historically low interest rates and new conforming loan limits, it’s an excellent time to purchase.
By Michaela Phillips. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.443.6292, e-mail firstname.lastname@example.org or visit michaelaphillips.com. NMLS: 312874.