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Conforming Loan Limits increased for 2017

The Federal Housing Finance Agency (FHFA) announced they are raising the maximum conforming loan limits for the first time since 2006.

This change will affect the maximum loan amounts purchased by both Fannie Mae and Freddie Mac in 2017.

In most areas of the country, the 2017 maximum loan amount for one-unit properties will be $424,100, a 1.703% increase from $417,000.  In high-cost areas, the new maximum loan limit will be $636,150, the same percentage increase from $625,500.

There are variations by county and number of units just as there were previously; contact me directly if you have questions on our local limits.  Click here to check out the announcement.

A permanent formula for establishing the loan limits was established under the Housing and Economic Recovery Act of 2008 (HERA).  The 2017 loan limits have been set under the HERA formula.

2017 Conforming Loan Limits | Thoughts and Ramifications

According to Black Knight Financial Services, a mortgage and financial services industry leader in technology and data analytics:

  • The average U.S. home value increased by $13,500 from last year, but
    low interest rates have kept the monthly P&I payment needed to purchase a median-priced home almost equal to one year ago.
  • A 50 BPS (a half point) increase in interest rates would be equivalent to a $17,000 jump in the average home price, and bring the median monthly income required to cover monthly payments on the median-priced home to a ratio of 21.5 percent.  This increase is still below historical norms, but puts more pressure on homebuyers.
  • Raising the conforming loan limit by $10,000 could result in 40,000 additional mortgage originations and $20 Billion in additional loan volume.
  • GSE loans originated at conforming limits are nine times more likely to have a “piggyback” second lien.
  • Overall condominium price growth is decelerating across the U.S.;  in fact, condo values are now appreciating at a slower rate than single-family residences (SFRs) for the first time since the housing recovery began.
  • Home affordability still remains favorable compared to long-term historic norms, but rising interest rates could put pressure on home affordability.

It remains to be seen what this change in conforming loan limits portends for the housing market.  These observations were published the day before the most recent presidential election.

 

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