For the third straight year, the Federal Housing Finance Agency (FHFA) – the HUD agency that regulates Fannie Mae and Freddie Mac – updated the conforming loan limits for every county in the United States. The new limits will go into effect on January 1, 2019.
A History of Conforming Loan Limit Increases
The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008. The act established the baseline loan limit at $417,000, while mandating that the baseline loan limit could not rise again until home prices returned to pre-2008 levels. That kept conforming loan limits stagnant for the next several years.
In December 2016, the FHFA began raising the limits again for 2017. At that time, the FHFA increased the conforming loan limits from $417,000 to $424,100. For 2018, the agency raised the loan limits from $424,100 to $453,100.
For 2019, the FHFA will increase the conforming loan limit from $453,100 to $484,350.
Why Conforming Loan Limits are Being Increased
The FHFA’s third quarter 2018 House Price Index (HPI) report showed that home prices increased 6.9%, on average, between the third quarters of 2017 and 2018. This includes estimates for the increase in the average U.S. home value over the last four quarters. The increase dictates that limits should once again be raised for the new year.
“As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2019 in all but 47 counties or county equivalents in the U.S.,” the FHFA said.
How the Conforming Loan Limit Increase Affects Homebuyers
Raising the conforming loan limit helps homebuyers when there’s an uptick in home prices, allowing them to borrow more in a rising market. That’s the first benefit to homebuyers.
Another advantage to raising conforming loan limits is providing options for homebuyers who may not qualify for a jumbo loan. When homebuyers wish to finance a purchase that exceeds the conforming loan limit for their county, that requires them to apply for a jumbo loan – a privately-backed mortgage that typically has more stringent underwriting rules.
Although there is no limit to the amount of a jumbo loan, qualifying for it requires the borrower to have a higher credit score than a conventional, FHA or VA home loan does. For homebuyers with credit scores under 680, the ability to finance a purchase without a jumbo loan is important – and raising the conforming loan limit allows more homebuyers to do that.
Conforming Loan Limits for 2019 in Southern California
Here are the new conforming loan limits for 2019 throughout Southern California:
- Riverside County – $484,350
- San Bernardino County – $484,350
- Kern County – $484,350
- Los Angeles County – $726,525
- Orange County – $726,525
- San Diego County – $690,000
Buying or refinancing in northern California? A complete list of 2019 loan limits in California (all counties in the state) can be found here.
To find out how these 2019 loan limit changes may increase your borrowing power on your next home loan, contact Wholesale Capital Corporation. A WCC loan officer will be glad to answer your questions.
Wholesale Capital Corporation is not affiliated with or acting on behalf of or at the direction of the Federal Housing Authority (FHA), the Department of Veterans Affairs (VA), or any government agency or government-sponsored entity. WCC is licensed by the California Bureau of Real Estate, Broker License #01147747 and the California Department of Business Oversight Finance Lenders License #603K610. Also licensed in Arizona by the Arizona Department of Financial Institutions, MB #0926199. NMLS# 9873.