The Mortgage Brothers Show

Up to date news, tips, and advice, so you can make real estate decisions with confidence.

Conventional loan limits are increasing January 1st 2018

12-04-2017About MortgagesEddie Knoell

The weather may be cooling down in the Phoenix Valley, but the market – like many across America – remains hot. As real estate prices continue to rise, the Federal Housing Finance Administration (FHFA) has increased the conforming loan limit for Freddie Mac and Fannie Mae mortgages.

The new loan limits go into effect in January of 2018, when the conforming maximum loan will rise from $424,100 to $453,100, a jump of 6.4%, or nearly $30K in additional loan. Loan amounts below this limit will be eligible for the lowest interest rates and payments over the life of the loan.

This is the second conforming loan increase in as many years – but only the second since 2006. Limits have also increased in what FHFA terms “high cost areas,” such as certain counties in California, Washington state and the East Coast. There, conforming loan limits have been increased to 115% to 150% of local median home values, or a conforming loan maximum of $679K in most high-cost areas.

None of the counties in Arizona, however, have been designated as a high-cost area, so the regular conforming limit applies.

New 2018 Conventional Loan Limits in Arizona

Single Family – was $424,100 and is now $453,100
Duplex – was $543,000 and is now $580,150
Triplex – was $656,350 and is now $701,250
Fourplex – was $815,650 and is now $871,450

What does this increase mean for the real estate market here in the Phoenix Valley? First, the increase will help provide a boost to home sales in the $500K to $600K range. A $30K increase in the loan amount will buy about $40K to $50K more house, depending on down payment.

That means a buyer that previously might have only qualified for a home costing $450K, assuming a 10% down payment, will now qualify for nearly $500K. With 20% down, the buyer could qualify for nearly $600K. This is a significant increase in purchasing power – especially when you contrast it with 2016’s relatively anemic loan increase of just $7,100 dollars.

Secondly, the increase means that many buyers who might previously have been forced to obtain a jumbo loan for purchases in this price range will save a significant amount of money. Jumbo loans typically offer rates .5% or more higher than conventional loans, which means higher payments for the same amount of money. Jumbos also have more stringent lending requirements regarding credit scores, income and other criteria, which means fewer buyers are able to qualify.

In all, this is great news for buyers and sellers in the Phoenix Valley real estate market. To learn more about how these mortgage increases might affect your upcoming purchase or sale, contact the Mortgage Brothers Team today.