Starting in January of 2018, FHA has increased the limit for "conforming loans" from $417,000 to $453,100 for San Antonio (and all of Texas) real estate purchases. This change could have a great impact on houses in the 400-600k range, and with home values increasing in our area each year, could be a welcome relief for many higher end home buyers.
First off, a bit of information on loans in general:
There are several types of loans and loan programs used by the majority of consumers.
a) FHA loan. This has a loan limit in Bexar County of $332,500 and a minimum downpayment requirement of 3.5%.
b) VA loan. This loan is available only to qualifying veterans and requires $0 downpayment. The limit on this loan has matched those of conforming loans ($417,000) so be on the lookout for the VA to increase the limits to match those of Freddie & Fannie.
c) VA Jumbo loan. This loan is for use by veterans only, and would be for the purchase of a home with a mortgage that would exceed the VA limits. This will require a downpayment equal to 20% of the loan amount over and above the VA loan maximum, and have additional qualifications than a traditional VA loan.
d) Conventional loan. This loan type is one with a more significant downpayment than other types and generally qualifies as a "conforming loan." Downpayment requirements could be as little as 5% although more typical is 10% or 20% downpayment. For second homes, vacation homes, or investment properties, these loans are the norm and the 20% downpayment may be an absolute requirement. Again, these loans can go up to the conforming loan limit without being classified as "jumbo."
e) Jumbo loans. These loans are those considered "non-conforming" or in excess of the conforming limits. They may require additional security, higher credit scores, a higher downpayment % and carry a higher interest rate than their conforming counterparts.
So, what is a "conforming loan"?
A conforming loan is one that Fannie Mae and Freddie Mac can purchase/ insure. The Federal Housing Administration (FHA) specifies that they need to fall below a specified loan amount limit. Any loan for an amount greater than this limit is considered to be a "Jumbo Loan" and may be subject to entirely different qualification criteria and interest rates. Think of it this way- once your mortgage amount gets high enough, it is considered to be a much more significant risk to lenders, so they are going to be a lot tougher in their research to ensure your ability to repay such a high balance.
What does this mean for homebuyers?
As a home buyer, one of the first things to examine is your financial position. How much money do you have available as a downpayment and what do you want your monthly mortgage amount to be? This will determine what price range of house you can buy. If you are looking at homes in the $400,000 to $600,000 range, this could significantly impact or even improve your buying power. With the old limit, buyers could buy a home priced at $521,250 and only put 20% down and not be subject to the Jumbo loan requirements. Now, with the new limit that amount could go up to $566,375 with only 20% down and still fall within conforming requirements. These amounts could change if you're looking to put more than the 20% down.
As always, you'll want to check with a quality lender about the specifics of your financial situation. We have some great lender resources, so just CONTACT US today and we'll get you started on the home buying process.
image courtesy of nikcname