The government sponsored enterprises of Fannie Mae and Freddie Mac have established the conforming loan limits for 2014. There are no major changes to these levels, which haven’t been altered in the previous nine years. The goal of the current limits has been to allow homeowners and buyers to have access to as many government-backed affordable home loans as possible. The loan limits remain effective immediately and are applicable to all conventional mortgages in the country.
The most important thing to note is that there are not major changes for these loan limits in the upcoming year.
Loan Limits
This term refers to the maximum home loan that will fit into the requirements for a conforming loan. The majority of areas across the country fit into the loan limit of $417,000, although there are locations where higher costs of home ownership increase the limits for a conforming loan.
Many government organizations use loan limits: the Federal Housing Administration has loan limits for the mortgages they are linked to and the Department of Veterans Affairs also has clear-cut limits for VA loans. Loans that go beyond these limits cannot be insured or guaranteed. For loans backed by Fannie Mae and Freddie Mac, loan limits have not changed since 2006. In that year, the government supported an increase to a $417,000 loan limit.
A conforming loan will meet the conditions as set forth by the government. There are benefits to going with a conforming loan as opposed to other types.
What About Loans Above That Limit?
If you’re looking at a mortgage that is higher than the conforming limit, you can possibly get a mortgage known as a jumbo loan. These loans are usually not backed by the government sponsored enterprises and are instead products promoted by national and even local banks. They have their own set of requirements, too, so it’s important to review the process of getting a jumbo loan before you start seeking out a lender.
Typically, the requirements for a jumbo loan are stricter because of the increased risk that lenders face in making such a high amount available. If a borrower elects to go with a jumbo loan, they are unlikely to get a low down payment.
If the conforming limits don’t match the home you’re looking for, talk to your lender about other possibilities. If you’re not in a high-cost area, a jumbo loan might be one type of solution to look for.
Why No Change?
Officials involved in the recommendation to keep limits the same argue that this was done to continue to make home ownership an affordable option for those seeking government-backed loans. The limits were last raised in 2006 and the years following that change were some of the most difficult the housing market has ever experienced.
Buyers struggled to get the credit and support they needed to purchase a home and a flux of homes from foreclosures sat on the market, largely untouched. The limits for homes in higher cost areas were increased in 2009. Most of these high-cost areas are classified by median home prices that are well above the national average.
Making it a possibility for Americans to get affordable government-backed loans is clearly still a priority as evidence by the lack of change in the conforming loan limits for 2014.
What About Multi-Unit Homes?
There are different loan limits depending on how many units are in the home. They are as follows:
1-unit home: $417,000
2-unit home: $533,850
3-unit home: $645,300
4-unit home: $801,950
For high-cost areas, these numbers can be increased as well.
Are There Any Other Options If My Loan Amount Is Too High?
If you don’t meet the qualifications for a conforming loan and you’re curious about other options outside a jumbo loan, you could consider an FHA-backed loan. These loans are backed by the government through the Federal Housing Administration. These loan limits tend to be higher than the limits that Fannie Mae and Freddie Mac use. This can be a good option if you’re concerned about the down payment for your house.
FHA loans will allow for down payments of just 3.5% and for the most part, this agency seems to be more flexible about approving people when compared with the government-sponsored enterprises.
One more benefit? There’s a special program known as FHA Back To Work where the agency will approve loans for a home buyer that is only 12 months out from a short sale, bankruptcy, or foreclosure. Under traditional home mortgages, such a borrower would represent a major risk and would not be able to obtain a loan.
The best thing to do before proceeding with your home loan is to make sure that you have researched all of your options. There are several different directions you can go.
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