Mountain Mortgage Guy: Fannie Mae, Freddie Mac release new mortgage loan limits (column)
In mortgage land, a key number we operate by is the lending limit on federally backed loans from Fannie Mae and Freddie Mac, which ultimately fund about 95 percent of mortgage loans and act as a benchmark for other private lenders.
Currently, the loan limits sit at $453,100 for conventional conforming limits for most loans and $626,100 for what are known as conforming high-balance loans available in high-cost areas.
The purpose of the agencies’ existence has always been to help promote a predictable supply of mortgage money at a rate that reflects current economic conditions for middle- and upper middle-class Americans to buy a home with.
If one needs a loan exceeding their limits and parameters, then the loan would be funded by private funds from sources such as a bank’s own money or bonds bought by private investors and institutions such as insurance companies. Those bonds are not backed by the feds. In addition, these loans usually, but not always, carry a higher interest rate and are always a little harder to qualify for. They also generally require a bigger down payment of 20 percent or more versus 3 percent to 5 percent for a conventional loan.
Fannie and Freddie raise their money by issuing bonds that are — at least in theory, if not specifically — backed by the federal government. In reality, although the feds do not guarantee investors their money back, it would be catastrophic for the feds to allow a default by the agencies.
Periodically, the agencies review these limits to evaluate if they are still serving the needs of the population they are obligated to serve. In an era of rising home prices, the old loan limits were deemed too low this week, and the mortgage industry eagerly awaited the announcement of the new loan limits.
The new limits are $484,350 for conforming loans and $696,100 for a high balance in Eagle County. This means that local buyers have a bit more buying power and can up their expectations for how much they can qualify for.
Navigating getting the best mortgage loan requires evaluating many factors and can involve many complex calculations. In the end, there can be tens of thousands of dollars in savings (or needless expenditures), even over a few years. Face time with a knowledgeable lender who will walk you through the options available and listen to your situation will be time well spent.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage-related questions from readers. His website and blog can be found at http://www.mtnmortgageguy.com.