Mortgage giants Fannie Mae and Freddie Mac will make a record increase to their loan limits by 2023, with a maximum of more than $1 million dollars for high cost areas.
As announced Tuesday by the Federal Housing Finance Agency (FHFA), the decision was made because, despite the fact that this year the housing market has cooled Because of rising mortgage rates, home prices continue to rise.
The most recent data shows an increase of 12.21% in the third quarter compared to the previous year, which has deepened the housing affordability crisis in the country.
Now, it has been decided that the baseline conforming loan limit for 2023 will be $726,200, $79,000 more than this year’s limit of $647,200.
However, higher cost areas will have a new loan limit of $1,089 million dollars or up to 150% of the reference loan limit. This year, the loan limit for high-cost areas is $970,800.
The increase is good news for homebuyers, especially those in high-cost areas that have been forced to opt for mortgages that exceed this limit and are more expensiveeven for a modest home.
Fannie Mae and Freddie Mac back about half of all American mortgages, but what they do is buy loans from lenders and sell them to investors. that does make those loans cheaper for lenders and keeps credit available and affordable for consumers.
The benchmark loan limit is the highest amount that can be lent to a person for the purchase of a home.
Loans that are qualified as conforming allow more homebuyers to qualify for credits that are generally less expensiverequire smaller down payments and allow for lower scores.
Mortgages above these loan limits are considered “non-conforming” or “jumbo” mortgages, and usually come with higher interest rateswhich are more difficult to rate due to the higher risk involved.
FHFA’s formula for increasing the limits each year looks at how much home prices have grown during the year. The law sets the maximum loan limit in high-cost areas as a multiple of area median home value, up to a maximum of 150% of the base loan limit.
high cost cities include areas like San Francisco and Silicon Valleyas well as New York City and Washington, DC, and the surrounding suburbs of the cities.
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Source: La Opinion
